EXECUTIVE SUMMARY 

The unequal development of cities in Karnataka and the inequitable distribution of resources in the state has been a catastrophe for a long time now. The government has often prioritized development in the tech hub of the state Bangalore, which has led to the ignorance of demands of lower-tier cities. The government should realise the economic potential of such minor cities and implement necessary reforms to develop them as a whole. 

OVERVIEW 

This policy brief discusses the possible policy options that can be implemented to improve the conditions of tier-2 and tier-3 cities in the state of Karnataka in India. Unequal distribution of resources has been a stubborn hindrance to achieve equitable development in the state. 

Therefore, it is necessary to upscale the lower-tier areas of the state. 

Pointed Summary 

Karnataka, a state located in the south of India is of greater economic importance to the nation because of its increase contribution to country’s fast growing GDP .Therefore, the state deserves more attention in regards to development of its cities and commerce to ensure increased rate of economic growth, This can be assured through equitable development of the lower-tier cities of the state. 

Relevance 

The government of India needs to allot extra focus on the country’s tier-II and tier-III cities, under their policies to leverage infrastructural development and increased investments over the next 5 years. These lower-tier cities have serious potential for economic growth and real estate development because of their geographical status around industrial corridors. . Karnataka occupies a pivotal spot in the Indian economy, being the 4th largest economy in the country contributing to a remarkable 8.2% of the country’s GDP in the financial year of 2023. However, in order to better the economic circumstances of individuals who reside in the tier-II and tier-III cities, it is now necessary to develop their infrastructure and draw in more investment, all while keeping the objective of equitable growth in mi

HISTORY 

The government of Karnataka has been often criticized for their policy of intensive focus on development of their major cities and commerce hubs like Bangalore which often leads to detriment of minor cities such as Mysore or Mangalore, Hubballi-Dharwad, and Belagavi. 

Bangalore is the leading contributor in the state’s revenue generation and foreign investment which induces the government to allot more resources to the city, so as to maintain its competitive edge. The government is forced to allot extra attention to Bangalore because of rapid urbanization and the urgent need for infrastructural improvements, which has led to ignorance of the needs of many smaller cities. Additionally, political complications and logistical issues also make it difficult for the government to focus equally on developing tier-II and tier-III cities. 

Current Stances 

This issue has troubled the state of Karnataka for a long time now. Governments have constantly failed to maintain equal distribution of resources and development in all the cities of the state, allowing Bangalore to power through and become a highly important economic zone for the state. 

As Bengaluru transformed into one of the leading Information Technology hubs of the world and the center of economic growth, more resources and policy focus shifted to this city leaving behind the smaller towns. From time to time the government has tried to encourage business in tier-2 and tier-3 cities. Still, due to structural barriers, resource limitations and acute needs of Bengaluru urban requirements have historically slowed progress in these areas. 

Tried Policy 

The Karnataka government has been trying to implement various effective policies to upscale development in tier-II and tier-III cities of the state. 

The government of Karnataka has been trying to develop Special economic zones (SEZs) and Information technology parks in lower tier cities like Mysore and Belagavi to improve the technological scene in the state and ensure inclusivity of all the cities. The government has also aimed to relocate some industries that were initially in Bangalore to tier-II and tier-III cities to ease the burden on capital while ensuring equal development in other cities. The state has also developed Public-Private partnerships to improve the condition of infrastructural facilities in lower cities. 

However, most of these policies have not reaped the expected amount of benefits. This is mainly because of poor implementation, slow execution, budget constraints and lack of local expertise. 

POLICY PROBLEM 

A. Stakeholders 

It is very evident that the most impacted stakeholders have to be the citizens residing in tier-II and tier-III cities. They are deprived of many economic opportunities that can leverage their standard of living. Both the ruling party and opposition face pressure to address regional disparities. The ruling party’s ignorance towards tier-II and tier-III cities often leads to a huge loss of voting share for them, which impacts their election outcomes. Even the labor force residing in Bangalore city is forced to face unprecedented issues such as high living costs, unbearable traffic, and deadly polluted air, all because of unequal development in the state. 

B. Risks of Indifference 

It is very essential for the government to address this issue on an urgent basis. This policy issue is a very popular case of unequal distribution of resources in our society. 

This extensive focus on Bangalore without balanced development has led to over congestion, traffic, and pollution in the city. It is also necessary to understand that neglecting lower tier cities like Mysore and Hubballi-Dharwad, and Belagavi means that the state is unable to efficiently leverage their complete economic potential. As mentioned earlier, these low-tier cities are packed with huge economic potential that can help diversify the state’s economy, create direct jobs, and leverage new industries. This will help in making the state less dependent on Bangalore for economic growth. 

C. Nonpartisan Reasoning 

From a nonpartisan point of view, the state should actively and efficiently address the infrastructural and economic gap between cities like Bangalore and tier-II and tier-III cities like Mysore to induce fair development of the state. Complete dependence on Bangalore for the state's economic growth has led to degradation of the city in terms of living standards and of course, the environment. Infrastructure overload, with rising traffic congestion, pollution, and strained services impacting quality of life. This particular issue has hindered Karnataka’s progress for a while now and does not allow the state to realize its complete economic potential. It is thus important for the government to address this issue on an urgent basis, focusing on reducing the infrastructural and financial gaps between the major and minor cities of the state. This approach also takes care of the regional imbalances and helps in improving job opportunities, health care, and education of the residents outside Bengaluru. Promoting the growth of tier-II and tier-III cities helps to create jobs and maintain talent while guaranteeing that economic growth is sustainable and not short-term for every state. 

POLICY OPTIONS 

A. Transportation networks and enhanced connectivity 

The transport sector is an important component of the economy and a common tool used for development. This is now even more essential in global economies where financial opportunities are directly linked to the mobility of people, including information technology and communication.The Karnataka government must build a reliable network of roads, trains, and aircraft to connect to the nation's major cities and economic hubs. This involves building airports in regional cities like Hubballi and Mysore, as well as national roadways and railroad stations and lines installed in outlying places. Such initiatives will make it easier for big companies and investors to travel to these lower-tier locations and invest accordingly. 

To leverage the infrastructural scene of such cities, it is essential to enhance the existing public transportation system to ensure efficient domestic travel for the labor class and businessmen which enhances their labor productivity. Implementing this policy would mean a huge financial cost for the government. However, with the revenue collected from taxes and other governmental sources, this project can be easily implemented and it is important to note that the return on investment for this project is really attractive, According to the budget, Karnataka was the second largest contributor to the total tax collection of the country, amounting to around 11.9% of the total tax revenue. 

B. Smart City initiatives 

The Hon.Prime Minister introduced the Smart Cities Mission on June 25, 2015. The mission's primary goal is to support cities that use "smart solutions" to provide basic infrastructure, a clean and sustainable environment, and a respectable standard of living for their residents. By focusing on the social, economic, institutional, and physical pillars of the city, the Mission seeks to enhance the quality of life and stimulate economic growth. The aim of this project is to develop models that serve as role models for other cities with great potential, emphasizing sustainable and inclusive growth. The Karnataka government should focus on implementing smart city projects in low-tier cities emphasizing digital infrastructure, waste management, energy efficiency, and public safety. This will ensure the enhancement of quality of life and will attract businesses seeking opportunities to grow in low-tier cities. Smart cities are very expensive to develop. For example, to transform Kalaburagi city into a smart city, the Karnataka government had to allocate a huge sum of ₹1,685 crores. The government needs to allocate a specific amount of money each year to develop smart cities in the state. 

C. Incentives for industries 

Government policies that encourage the creation of new businesses or encourage current ones to grow or stay put are known as investment incentives. Investment incentives are generally designed to sway investors' location choices so 

that they can benefit from foreign direct investment (FDI). To direct foreign affiliates toward areas or industries deemed in need of investment, or to encourage them to operate in desired ways, investment incentives may also be offered. The Karnataka government should offer tax breaks, subsidies, and other financial incentives to businesses that are open to establishing their operations in low-tier cities. The Karnataka government has implemented various incentive schemes to attract industries to set up their firms in lower-tier cities under their Industrial policy 2020-2025. The financial cost to implement this policy is comparatively much less as compared to the other recommended policies. It is also notable that this policy will in turn improve the government's revenue through taxes because of the increase in industries in the state. 

D. Skill development programs 

The government of Karnataka should also focus on introducing skill development and training programs to facilitate entrepreneurship support and creating job-worthy employees to ensure economic growth. These programs should be tailored to meet the needs of local industries and emerging businesses to ensure a skilled labor force. 

More initiatives can include collaborating with educational institutes to align the curriculum taught with market demands to ensure an effective and skilled workforce. To foster entrepreneurship, the government should install incubators and accelerators that will help in providing mentorship, funding, and resource allocation for emerging startups in such cities. This will also ensure that the local economies can grow independently and create employment for themselves. 

The government of Karnataka has allocated over ₹400 crore in the last few years, in order to introduce skill development programs in the state. This funding includes direct funding for training programs, infrastructural development, and targeted support to few sections of the society. 

E. Focus on sustainability 

Sustainability in business refers to conducting operations without having an adverse effect on the environment, a community, or society at large. Karnataka government should focus on promoting environmentally sustainable activities within businesses by emphasizing on adoption of renewable energy resources and energy-efficient technologies. This strategy aligns with the global trends of development through ESG compliance (Environmental, social, Governance), which will help in making such cities more attractive to big MNCs to invest and install their businesses here. 

F. International partnerships 

Organizations at the same level, including NGOs, national authorities, businesses, charitable foundations, and local and national civil society groups, can form international partnerships. These lateral alliances are advantageous to groups pursuing related or common objectives. 

In order to transform the economic and productive structures of a region, international partnerships are a very effective way to attract investments. It is important to maximize the potential of international investment treaties, foster an environment for sustainable finance, provide capacity building and technology transfer, and establish coordination platforms. The Karnataka government should initiate business partnerships with international stakeholders and trade delegations to explore investment opportunities in such cities. 

CONCLUSIONS 

To sum up, the growth of Karnataka's Tier-II and Tier-III cities is crucial not only for achieving regional equity of growth but also for realizing the state’s entire growth potential. The concentration on developing transportation services, improving the cities by means of smart city, and providing subsidies rank as the most important factors to encourage investment and raise these cities as economic centers. In addition, skills training and the promotion of enterprises would enable the regions to have the right human capital and promote a culture of creativity. Foreign direct investment and other forms of development can be further enhanced through international ties as well as the global market for the state. The above outlined strategies when implemented appropriately will not only enhance the living conditions of the residents in these urban areas but also facilitate the economic development of the state and the country as a whole. 

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ACKNOWLEDGMENT 

The Institute for Youth in Policy wishes to acknowledge Gwen Singer, Mason Carlisle, Lilly Kurtz, Paul Kramer. and other contributors for developing and maintaining the Fellowship Program within the In Institute.

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