The key expectation is simplification of taxation, particularly TDS, which currently creates a heavy compliance burden, says K Ravi, Chairman, International Business Expert Committee, the Bangalore Chamber of Industry & Commerce. Ahead of the Union budget, Ravi speaks on the concerns of MSMEs, shortcomings of manufacturing in Karnataka, shortage of skilled labour, reasons for failure of startups and others. Excerpts....
It is a common conception that Bengaluru’s economy is almost entirely tech-driven. Is that true?
Karnataka accounts for around 36 per cent of the country’s Information Technology sector. This is primarily due to the priority given to engineering education in the state since its inception. Coming to other sectors, I think as far as manufacturing is concerned, we are way behind Tamil Nadu and other states. I was in Japan back in September, where Bangalore Chamber of Industry & Commerce (BCIC) signed a memorandum of understanding (MoU) with the Mayor of Osaka. It was signed specifically in terms of manufacturing. The Kansai region is very strong in terms of manufacturing, and they are very keen to collaborate with Indian companies. I feel the Karnataka government has to provide a lot more impetus to manufacturing.
Do you think AI will replace human talent?
There’s a lot of hype about AI. But let us also understand that AI cannot take care of all our requirements per se. It may do 90 per cent of the work, but the last 10 per cent has to be human output. I can use ChatGPT or any other software and get all the answers, but that doesn’t look authentic. Maybe it can be employed in jobs of “repetitive” requirements, but not elsewhere.
What are the shortcomings of the manufacturing sector in Karnataka?
Getting labour is a big problem. With stringent labour laws, getting labour at lower levels is very tough. Skilled manpower is one area where I feel the government has to spend more effort. Foreign companies like those from Japan and Germany seek specialised labour, not generic. After we signed the MoU with Osaka, we asked them to send their trainers to train the workforce here, because getting good, skilled labour is one of the main problems.
You spoke about skilled labour, but Karnataka has a high output of engineering students. Where is it going wrong?
There is a mismatch between the capability of engineers and the requirements of industry. I feel the government should sit down with industry and the academia, and understand the gap.
Do internships help?
There is a problem with how internships are structured. What’s in it for the employer or the person who’s training? Most trainees or interns are only bothered about getting certificates of completion that they can submit to their university authorities. According to me, internships should be an ongoing process alongside the curricula. Otherwise, internships are just for the certificate’s sake.
After you met with Deputy Chief Minister DK Shivakumar, how much progress has been made on the infrastructure inputs you shared for Bengaluru?
Bengaluru continues to face serious challenges, especially in waste disposal and traffic. While Metro expansion takes time, waste management could be improved through mechanisation, which is currently resisted due to employment concerns. Traffic congestion is worsening, and measures like congestion charges or limits on vehicle registrations are needed. Without strong intervention, both issues will deteriorate further.
What are your key expectations from the upcoming Union and State budgets?
The key expectation is simplification of taxation, particularly TDS (tax deducted at source), which currently creates a heavy compliance burden. Incentives for large TDS contributors and extended depreciation benefits for manufacturing have been suggested. Export-driven industries are under stress due to US tariffs, though progress on FTAs with several countries is a positive development.
What are the main challenges exporters face in Customs and compliance?
While income-tax processes are largely digitised, Customs clearances, incentives and refunds remain cumbersome. Faster and complete digitisation is needed to reduce red tape and ease exporter difficulties.
What are the key concerns of MSMEs today?
MSMEs struggle mainly with a lack of R&D funding and access to credit. Banks remain cautious, incentives are limited, and technology adoption is weak. Government support for R&D, better credit flow, cluster-based development and improved logistics are crucial for their survival and growth.
How does this affect foreign companies coming to India?
Foreign companies face delays in clearances and land allotment, weak follow-up after MoUs, and poor connectivity. Inefficient road, rail and port linkages raise logistics costs and complicate supply chains, making operations outside Bengaluru difficult and discouraging investment in Tier-2 and Tier-3 cities.
Is this why Tier-2 and Tier-3 cities beyond Bengaluru are not growing?
Yes, partly. Cities like Mysuru, Hubballi and Tumakuru lack quality schools, multi-specialty hospitals, housing, and good mobility. Without these, businesses and talent continue to move to Bengaluru.
Why haven’t industrial clusters in Karnataka like Kalaburagi developed fully?
The clusters exist, but growth is limited because education, healthcare, housing and logistics are insufficient. Roads are improving, but ecosystem support is still needed.
What about the demand to increase minimum wages?
Minimum wages must be viable. Labour committees often have more employee representatives, and politics can influence decisions. If wages are too high, businesses struggle to remain competitive. While the new Labour Code has introduced improvements, state rules are still being framed, and compliance paperwork remains high. Ease of doing business requires simpler processes, and further digitization can help reduce the burden.
How much more can Bengaluru handle — economically, infrastructurally, and physically? Should a carrying capacity study be done?
Growth is moving toward Hoskote and Kolar, but current infrastructure is insufficient. Until these areas develop into self-sustaining cities, Bengaluru will continue to face traffic congestion and pollution. Measures like car usage fees could help, but political and administrative constraints delay implementation. Public spaces in the city centre are also needed, with corporates willing to support, but the government must ensure basic amenities.
What advice do you have for youngsters who want to start a business and how is the startup sector doing?
The success rate of startups remains low at around 2-3 per cent, largely because many ideas lack practical feasibility and adequate mentoring, a chamber representative told me. While sectors such as defence, robotics, artificial intelligence, IoT and deep-tech have produced notable successes, most startups struggle due to weak financial management and poor statutory compliance. Nearly 75-80 per cent of startups are unaware of basic legal and accounting requirements, which later emerge during investor due diligence by adding that mentoring was key.
Is there any safety net for entrepreneurs and employees when a startup fails? What happens to people who join startups that don’t work out and are left without employment?
Many startup founders struggle for years, often burning their savings, with virtually no safety net. The only real cushion comes from venture capital funding, where investors take risks in return for potential rewards. Globally, startup ecosystems offer strong institutional support. In some cases, service providers also share risk by accepting equity instead of fees, benefiting only if the startup succeeds. Such models reduce early financial pressure on entrepreneurs. Both the State and Union governments are already extending significant support to the startup ecosystem through policies and funding initiatives. While challenges remain, public backing and alternative investment models are gradually strengthening India’s startup landscape.
There is growing talk about companies moving from Bengaluru to cities like Hyderabad or Chennai. From your perspective, how real is this concern, and should Karnataka be worried about it?
There is no real migration of companies from one state to another, either from a personal perspective or from the chamber’s view. What does happen is competition for big-ticket investments, where incentives and Central government support matter, though decisions are largely merit-based. Smaller companies usually choose locations based on ecosystem strengths — IT in Bengaluru, manufacturing in Chennai or Pune, or healthcare in Hyderabad. Companies research labour availability and comfort before investing. Bengaluru’s biggest advantage remains its strong human resource base, especially in software and IT, with high demand driving frequent job changes and salary jumps of around 30 per cent, a trend that began with the IT sector.
But does that fall in line with what you were saying about lack of skill?
The trend is most visible among professionals with five to eight years of experience, who already possess strong skill sets and are easily lured by 20-30 per cent higher pay. Employers face growing challenges, while concerns persist over declining work ethic among younger employees, whose expectations and priorities differ sharply from earlier generations.