Karnataka Electronics System Design & Manufacturing (KESDM)
Policy 2017-2022:

Amongst all emerging economies, India has been one of the frontrunners from growth and economic development perspective. The Indian electronics system design and manufacturing (ESDM) industry is one of the fastest growing sectors in the country. Changing global landscapes in electronics design and manufacturing capabilities, and cost structures have turned the attention of global companies towards India. Companies from around the world are looking to build local capabilities in India not just to serve the resident market but also to cater to overseas markets. This has resulted in the development of indigenous capabilities across the ESDM value chain in India. ESDM industry in India comprises of four key components: Electronics Products; Electronics Manufacturing Services, Electronic Components and Design Services which are at varying stages of development. Similarly, various electronics applications markets such as telecom electronics, automotive electronics, consumer electronics and industrial electronics, are at different stages of ecosystem development. The focus is currently on providing the necessary impetus to take advantage of the dormant capabilities across the various electronics markets and developing the missing links so as to make the local ESDM sector globally competitive

Karnataka ESDM Industry

Karnataka is known to be a centre of hi-tech industry, contributing significantly to the country’s revenues from information technology, biotechnology, ESDM, aerospace and other technology sectors. Karnataka’s GDP stands at USD 120 billion and is growing at a healthy 7 percent per annum. It has an industrial output of USD 61.5 billion and a cumulative FDI of USD 18.30 billion since April 2000 to September 2015. Karnataka contributes to more than a third of IT, ITeS and electronics exports in the country. The value of total exports of the state is USD 52 billion which contributes to 13 percent of India’s exports to the world.

 The best and the largest global companies across sectors have their R&D and innovation centres here. Karnataka is the second largest chip design hub in the country with a presence of 85 chip designing companies and was the first state to rollout initiatives for innovation centres, skilling centres and dedicated ESDM clusters. Around 3000 personnel are trained annually in the KESDM sector.

Karnataka is the fourth largest contributor to electronic industrial output in the country and contributes to 10% of the country’s electronic industrial output with a recorded growth rate of 18% CAGR during 2008-2013. It has the second fastest growing start-up ecosystem in the world and is home to billion-dollar Indian start-ups.”


  • Vision of the KESDM Policy 2017-22:
    Develop Karnataka into a global ESDM hub and a hotbed of innovation through focused interventions and encouragement to local companies in the sector.
  • Goals of the KESDM Policy 2017-22:
    The policy aims to foster high growth for the ESDM industry, which can be achieved by attaining the following goals:
  • Stimulate the growth of 2000 ESDM startups during the policy period.
  • Enhance value addition done in Karnataka by 50%.
  • Create 20 Lacs new jobs in the ESDM industry by 2025; both direct and indirect, thereby increasing the total workforce in the sector to ten times the present number.
  • Effect a quantum jump in the overall revenues of Karnataka’s ESDM companies to USD 40 billion by 2025.

Skill Development:

Continue the focus on skill development and nurturing of the talent pool by refining and strengthening the existing initiatives; introduce new, strategic interventions for focus sectors.


Quality Infrastructure:

Create common infrastructure facilities and center of excellences (CoEs) in specific areas, to provide an impetus to local industry; encourage new investments and growth in tier-2 cities across the state.


Ecosystem Support:

Operationalise PMA policy to encourage domestic procurement; accelerate next generation technologies through pilot projects and encouragement to grass-roots entrepreneurship and IP creation.


Encouragement to Start-ups and MSMEs:

Strengthen the existing Semiconductor venture fund for accelerated investments; promote expansion and growth of KESDM industry through market development activities and support to local companies.


Enhancing Ease-of-doing Business:

Simplify and streamline policies and procedures to enhance overall experience of doing business in the state; put in place mechanisms for faster facilitation of incentives and other policy benefits to attract investments from global companies in the sector.


Govt. of Karnataka aims to foster the ESDM industry to innovate and build scale. To facilitate the various objectives of the policy, a host of incentives and concessions will be applicable for the industry throughout the policy period as below.

SL Incentive / Concession / Grant Applicability of incentive for KESDM registered companies Applicable Restrictions Max amount per application No. of claims allowed for a single Compan Remarks
1 Patent Registration Incentive Startup & MSMEsLarge and Mega Enterprises Patent should be filed or granted within the policy period INR 2 Lacs for domestic; INR 10 Lacs for International A single company will be eligible for a maximum of five reimbursements during the policy period 75% given when patent is filed, rest 25% when it is granted
2 International Marketing Incentive Startup & MSMEsLarge and Mega Enterprises Reimbursements of 50% of the actual cost incurred Maximum of INR 5 Lacs per year For 2 employees for participation in up to 2 international events /conferences /tradeshows per company per year
3 R&D Grant Product based companies. For design and services companies, only if the IP resides with the Karnataka based ESDM Company.Startup & MSMEsLarge and Mega Enterprises The R&D grant will be available to only those companies that are less than 7 years old This grant is subject to a maximum of INR 2 Crores per company per year A single company will be able to claim this incentive only twice during the entire policy period Irrespective of the amount that gets reimbursed, the R and D grant can be claimed only twice during the policy period
4 Capital Subsidy Large and Mega Enterprises Applicable to the first two anchor units in each Greenfield cluster 10% capital subsidy, up to a maximum of INR 10 Crores This subsidy is not applicable to Startups and MSME’s.
5 Reimbursement of Quality Certification Costs Startups and MSMEs Reimbursement of up to 50% of testing/certification charges INR 10 Lacs per year Charges incurred for getting the products tested/certified from any lab domestic/abroad
6 Reimbursement of Prototyping Cost Startups and MSMEs Reimbursement 50% of the cost incurred for developing a prototype of a product. INR 10 Lacs per year Maximum of 2 sanctions per year per company
7 Interest Subsidy Startups and MSMEs Interest subsidy of up to 6% per annum on term loans taken during the policy period For a period of five years for loans of up to INR 50 Lacs The term loan must have been taken from a scheduled bank or a state-level financial institution such as KSFC
8 PF / ESI Incentive Startups and MSMEs Maximum of INR 2000 per person per month for 2 years INR 12 Lacs Reimbursement will be made only once per company during the policy period This subsidy will only be applicable to a new company, registered within the last two years, as on the date of application. Companies who have started a new subsidiary or branch office in Karnataka will also be eligible, provided the new setup has been established within the last two years as on the date of application.Only for new employment
9 Exemption from Stamp Duty Startup & MSMEsLarge and Mega Enterprises Stamp duty paid in respect to State Government Available Stamp Duty Exemption for:Startups and MSMEs – 100%Large and Mega Enterprises – 75%
10 Reimbursement of Land Conversion Fee Startup & MSMEsLarge and Mega Enterprises Reimbursement for payment of land conversion fee from agriculture use to industrial use Upper Limit INRStartups and MSMEs – 75% Large and Mega Enterprises – 50%
11 Concessional Registration Charges Startup & MSMEsLarge and Mega Enterprises A concessional rate on registration charges for all loan documents, lease deeds and sale deeds: INR 1 per INR 1000
12 Power Tariff Concession Startup & MSMEsLarge and Mega Enterprises This will be subject to KERC regulations
13 Subsidy for setting-up ETP Startup & MSMEsLarge and Mega Enterprises One time capital subsidy to the tune of up to 50% of the cost of ETP 1 in policy period Upper Limit INRStartups and MSMEs – 50 Lacs Large and Mega Enterprises – 1 Crore
Karnataka Innovation & Technology Society
Government Of Karnataka