The Future of ESDM Leadership: Karnataka at the Forefront

July 1, 2024

Key Takeaways:

  • Key Takeaways:
    • Market Leader with Exponential Growth: India's fintech market is a giant, currently valued at $584 billion and projected to hit $1.5 trillion by 2025. Already boasting the world's highest adoption rate at 87%, the sector is poised for further expansion as tier 2 and 3 cities emerge as new hubs.
    • Diversified Landscape and Innovation Hub: Powered by cutting-edge technologies like AI and Big Data, Indian fintech offers a comprehensive range of solutions including payments, lending, insurance, and wealth management. Karnataka, a leading tech hub, provides an ideal investment environment with robust infrastructure, skilled talent, and supportive policies.
    • Addressing Challenges for Sustainable Growth: Cybersecurity and regulations are key concerns, but India is actively tackling them. Initiatives like UPI, KYC norms, and the India Stack promote security, transparency, and responsible development. Collaboration between investors, fintech firms, and regulators can unlock India's fintech potential, driving financial inclusion and economic prosperity.

Karnataka is a prominent player nationally, contributing around 10% of the national electronics output, with a 40% share in electronic design and a staggering 50% share in electronic product companies. The state is the largest chip design hub in India.

Several factors make Karnataka an ideal location for ESDM investments. The state offers a robust ecosystem supported by investor-friendly policies, readily available industrial land, and a highly skilled workforce with a strong emphasis on skill development and subsidies, further complemented by an efficient logistics network.

Karnataka’s leadership in ESDM is further solidified by its commitment to innovation. The state holds the top position in NITI Aayog’s India Innovation Index and boasts a thriving startup ecosystem, with 30% of India’s startups and 50% of IoT startups based out of Karnataka. The state is positioned to not only lead India’s ESDM sector but also establish itself as a global leader in the years to come.

The Indian Electronics System Design and Manufacturing (ESDM) sector is experiencing a period of phenomenal growth. The country’s electronic manufacturing is likely to double in the next 5 years–projected to reach around USD 250 billion in the next 5 years.

Currently, India owns a 3% share of Global Electronics Manufacturing. However, it is targeting to increase this share to 15-20% in the Global market by FY2026. Within this dynamic landscape, Karnataka has emerged as a frontrunner, poised to play a pivotal role in shaping the future of ESDM leadership in India.

Karnataka: An ESDM Powerhouse?

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Karnataka is a prominent player nationally, contributing around 10% of the national electronics output, with a 40% share in electronic design and a staggering 50% share in electronic product companies.  Karnataka has over 100 Fabless chip design houses and is the largest chip design hub in India.

Several factors make Karnataka an ideal location for ESDM investments. The state boasts a robust ecosystem, investor-friendly policies, readily available industrial land, a highly skilled workforce and a strong emphasis on skill development and subsidies. This is further complemented by an efficient logistics network that connects businesses to crucial demand centers and gateways.

The State-wide ESDM Ecosystem

While Bengaluru, the capital city, is undoubtedly the state’s IT hub and a major ESDM player, cities like Mysuru, Hubballi, and Dharwad are actively growing to be key clusters in the ESDM sector.

  • According to the India Electronics and Semiconductor Association (IESA) assessment in their State Preparedness Index, Karnataka is the most proactive in creating a conducive environment for the ESDM sector.
  • Karnataka's leadership in ESDM is further solidified by its commitment to innovation. The state holds the top position in NITI Aayog's India Innovation Index, a testament to its focus on fostering a dynamic environment for technological advancement.
  • This is further emphasized by the presence of over 400 Multinational Companies (MNCs) with global R&D centers and a thriving startup ecosystem, with 30% of India's startups and 50% of IoT startups based out of Karnataka

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Looking Ahead

The potential for growth is not lost on the state or the country. With the MoU signed between IESA and the Karnataka Digital Economy Mission (KDEM) as of June 2024, Karnataka is likely to become a mainstay ESDM hub for India – and for the Global Market.

India’s ESDM sector is on a growth trajectory, and Karnataka is at the forefront of this exciting journey. With its robust ecosystem, skilled workforce, and unwavering focus on innovation, Karnataka is well-positioned to not only lead India’s ESDM sector but also establish itself as a global leader in the years to come.

Author- Nikita Tatachar, Intern at KDEM

Image-1: The Indian Fintech Revolution: Key Insights and Growth Projections

Fintech can play a key role as an enabler of credit accessibility and affordability for small-scale enterprises. India is the fastest-growing market in Fintech, and by connecting local companies with global counterparts, the exchange of information and technology can foster the momentum of the Fintech Revolution.

India’s fintech future is booming, poised to reach $1.5 trillion by 2025. To capitalize on this, it is essential to address cyber security threats and harness the potential of AI for fraud prevention and personalized finance while collaborating with regulators to ensure responsible innovation that fosters financial inclusion and propels India’s economic growth.

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