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Karnataka Cabinet Approved the New Industrial Policy for 2020-2025

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Karnataka cabinet approves new industrial policyOn July 23, 2020 Karnataka Cabinet approved the new Industrial Policy for 2020-2025 that aims to attract Rs 5 lakh crore investment and create about 20 lakh employment over the next 5 years to help mitigate the economic impact of the COVID-19 crisis. The policy will introduce significant fiscal, labour, and land reforms and will focus on facilitating investments to the state by offering fresh incentives and easing regulatory processes.

  • The policy adopts a production turnover based incentive system instead of tax based incentives, a first such initiative in India

Key Cabinet approval

  • “The Industrial Disputes and Certain Other Laws (Karnataka Amendment) Ordinance”2020
  •  To set up the Karnataka Digital Economy Mission under section 8 of the Companies Act, 2013 to promote 7,000 start-ups, e-commerce and other gig economy companies. 49% of the share will be held by the state and remaining 51% by the industries.

New Industrial Policy for 2020-2025


The policy will help the state to emerge as a global leader in advanced manufacturing, research and development and  innovation. It will also aid the state to create an ecosystem for an inclusive, balanced and sustainable development of the state.

Upgrades Tier 2 and Tier 3 cities- It will promote Tier 2 and Tier 3 cities as engines of economic growth.

Grouped districts into 3 zones

It has grouped districts of the State into three zones, to incentivise investments in the industrially backward districts. 

The Industrially backward districts are classified in Zone-1 & 2 and Bengaluru Urban and Rural districts are classified in Zone-3.

Industries promoted–  New industrial policy promotes automobile, auto components, pharmaceutical,machines and tools, surgical equipment, defence, electrical vehicles and mechanical based industries.

Note– The policy also outlines the target of the state to reach 3rd position in merchandise exports in the next 5 years.

Industrial Disputes and Certain Other Laws (Karnataka Amendment) Ordinance 2020

This ordinance will address the challenges faced by industries due to the COVID-19 pandemic.

The ordinance will amend some provisions under the Industrial Disputes Act, 1947 the Contract Labour (Regulation and Abolition) Act, 1970 and the Factories Act, 1948


Industrial Disputes Act, 1947

As per the Amendment made to Section 25(K) of the act, the worker threshold will increase from 100 to 300. ie., those establishments that employ 300 or more people will have to seek the government’s permission for closure, retrenchment, or layoff.

Contract Labour (Regulation and Abolition) Act, 1970

As per the amendment made to the act, the factories that hire less than 20 contract workers for electrified units and less than 50 contract workers for non-electrified works can function without government nod or inspections. 

Factories Act, 1948

i.The overtime limit per quarter is increased from 75 to 125 hour. 

ii.Earlier, those factories, with electricity connection and employing over 10 workers or factories without power hiring over 20 workers, came under the Act. Now the limit has been raised to 20 and 40 respectively.

Other Amendments

The periodicity of the revision of minimum wages will be fixed under the Minimum Wages Act, 1948 and will be linked to factors like inflation and the consumer price index.

Note– The amendments were based on the recommendations made by the Ministry of Labour and Employment in May.

Recent Related News:

i.The Jammu & Kashmir Administration approved the Agriculture Production Department’s proposal to change its nomenclature to “Agriculture Production & Farmers Welfare Department” and announced new rules for appointments to various posts.

ii.the Himachal Pradesh (HP) state government has decided to launch employment guarantee scheme called “’Mukhya Mantri Shahari Rojgar Guarantee Yojna” that will provide 120 days of employment to those living in urban areas.

About Karnataka:
Capital– Bengaluru
Chief Minister– B. S. Yediyurappa
Governor– Vajubhai Vala