Karnataka Digital Economy Mission

Mitigating Investment Risks in India: Karnataka Digital Economy Mission (KDEM) Eases Foreign Retail Expansion

We understand that venturing into new markets can present a number of challenges, especially when it comes to understanding government policies and local ecosystems. As you consider expanding your operations to India, particularly Bengaluru.


Introducing the Karnataka Digital Economy Mission (KDEM), an initiative jointly led by the Government of Karnataka and industry leaders. KDEM aims to bridge the gap between government policies and industry needs, particularly in the digital space. This comprehensive framework offers invaluable support to foreign retailers like you, seeking to set up their Global Capability Centers (GCC) or expand their businesses in Bengaluru and across Karnataka.


Let’s understand, how KDEM catalyzes bridging the gap between government initiatives and industry needs, offering invaluable support and guidance to foreign retailers like yourselves. Whether you are considering establishing a GCC in Bengaluru or expanding your business operations elsewhere in Karnataka, you need to understand the core value of KDEM. 


Core Objective of KDEM:

• Support technology investments in Karnataka

• Support the Department of Electronics, IT / BT, S&T

• Help structure promotional efforts abroad.

• Help position Karnataka well with technology-sector-specific investment


• Sponsor and organize research to uncover technology opportunities.

• Provide feedback to government departments on the policy initiatives needed

to attract further investments.

• Act as a bridge between government and industry

• Build a comprehensive Vision Document with strategy and roadmap


• To build a Brand in Karnataka and enhance our leadership position across



What makes Bangalore (Karnataka) an ideal location for GCC:

The state of Karnataka, particularly Bangalore, is a prime location for retailers considering opening a Global Capability Centre (GCC) in India. With a thriving technology sector and a strong focus on innovation, the state offers a skilled workforce, competitive pricing, and supportive government policies that encourage business growth.


Economic Overview:

    • GSDP: CAD $268 billion

    • Projected Growth Rate: 9.5%

    • FDI Attraction: 40%+

    • IT and ITeS Exports: First in India

    • Total Exports: First in India

Innovation & Industry:

    • India Innovation Index: First in India

    • R&D Hub: Largest in India

    • Fortune 500 Companies: 400 headquartered in Karnataka

    • ESDM, Aerospace & Defence, Machine Tool Manufacturing: First in India

    • Biotech Production & Exports: First in India

Infrastructure and Amenities:

    • Engineering colleges, ITIs, and polytechnics: Highest number in India

    • Industrial corridors, Quality Education, Skilled Manpower, Knowledge Hub, Policy-Driven, Auto Components, and Electric Vehicles, and Medical Devices Agri and Food Processing, Textiles and Apparel, Steel Industry, Energy Sector, Tourism and Wellness, and Industrial Cluster Development Programme

This combination of factors, along with a pleasant climate and cosmopolitan culture, makes Karnataka an ideal choice for retailers looking to establish GCCs in India.



IT Policies

Government of Karnataka’s (Bangalore) IT Policy 2020-2025 offers a comprehensive set of incentives and offerings aimed at supporting foreign retailers in setting up their Global Capability Centers (GCCs) in the state. These incentives not only provide financial support but also contribute to creating a favorable business environment for the IT/ITeS industry in Karnataka.

Key Incentives and Offerings for Foreign Retailers:

    • Creation of IT Hubs/Clusters: Financial support of up to 20% of Fixed Investment for Infrastructure (excluding the cost of land), subject to a ceiling of approximately CAD 545,455, is available for setting up IT hubs or clusters. This support is contingent upon a minimum occupancy rate of 60% by IT/ ITeS entities or a minimum employment generation of 500 in the IT/ITeS industry.

    • Co-working Spaces/Plug and Play Infrastructure: Foreign retailers can benefit from a financial support of up to 33% of the Fixed Investment for Infrastructure (excluding the cost of land) with a ceiling of approximately CAD 363,636, subject to a minimum built-up area of 15000 sq. ft. and a minimum occupancy rate of 60% by IT/ITeS entities or a minimum occupancy by 300 professionals in the IT/ITeS industry.

    • Lease/Rental Reimbursement: Reimbursement at the rate of approximately CAD 0.18 per sq. ft. for IT/ITeS entities setting up outside Zone 3, up to a maximum amount of approximately CAD 9,090 overall.

    • Exemption on Stamp Duty: Foreign retailers can benefit from an exemption of 75% in Mysuru, Hubballi, Dharwad, and Mangaluru, and 100% for all other Zones except Zone 3, as per the prevailing Karnataka Industrial Policy.

    • Power Tariff Concession: Instead of Commercial Power Tariff, IT/ITeS industries in Karnataka are eligible for a power tariff concession.

    • Quality Certificate Cost Reimbursement: 50% reimbursement of the cost of quality certification fee with an overall ceiling of approximately CAD 109,090 for IT/ITeS Entities.

    • Marketing Cost Reimbursement: 30% of the actual cost incurred including travel for international marketing through trade show/exhibition participation, up to approximately CAD 27,272 per entity for IT/ ITeS Entities.

    • Reimbursements on PF/ESI: Reimbursement of PF/ESI for all IT/ITeS entities outside Zone 3, at the rate of approximately CAD 36 per employee per month for 2 years for all new employment (only applicable for technical manpower) created.

    • Patents Cost Reimbursement: Up to approximately CAD 36,363 for domestic patents and up to approximately CAD 181,818 for international patents.

ESDM Policy 2017-2022

Karnataka’s ESDM Policy 2017-2022 provides an attractive array of incentives and offerings for foreign retailers seeking to establish their Global Capability Centers (GCCs) in the state. These initiatives are designed to bolster the Electronics System Design and Manufacturing (ESDM) sector, fostering innovation, creating employment opportunities, and enhancing the state’s position as a hub for technology and innovation. With robust support from the government, GCCs can benefit from financial assistance, streamlined processes, and a favorable business ecosystem, making Karnataka an ideal destination for their expansion and growth in the fast-evolving ESDM landscape.

Key Incentives and Offerings for Foreign Retailers:

    • Patent Registration Incentive: KESDM companies will be reimbursed for actual costs, up to approximately CAD 3,636 for filing a domestic patent and up to approximately CAD 18,182 for filing an international patent.

    • International Marketing Incentive: The Government of Karnataka will provide reimbursements of 50% of the actual cost incurred in trade show participation and marketing events.

    • R&D Grant: A grant of 25% (for startups and MSMEs) or 10% (for large & mega enterprises) of expenses will be available for companies less than 7 years old (from the date of incorporation) towards R&D expenses.

    • Capital Subsidy: KESDM companies are eligible for a capital subsidy of up to 10%, up to approximately CAD 1.81 million for the first two anchor units in each greenfield cluster.

    • Reimbursement of Quality Certification Costs: Registered KESDM Startups and MSMEs will be eligible for reimbursement of up to 50% of testing/certification charges incurred for getting the products tested/certified from any lab domestic/abroad.

    • Reimbursement of Prototyping Cost: Reimbursement of 50% of the cost incurred for developing a prototype of a product, subject to an upper limit of approximately CAD 18,182 per year, with a maximum of 2 sanctions per year per company.

    • PF / ESI Incentive: Registered KESDM Startups & MSMEs will be reimbursed Provident Fund (PF) or Employee’s State Insurance (ESI) of approximately CAD 36 per employee per month for two years, subject to total reimbursement of up to CAD 218,181.

    • Interest Subsidy: Interest subsidy of up to 6% per annum on term loans for a period of five years for loans of up to CAD 909,091.

    • Exemption from Stamp Duty: 100% in case of startups and MSMEs and 75% in case of large and mega enterprises.

    • Reimbursement of Land Conversion Fee: 75% in case of startups and MSMEs and 50% in case of large and mega enterprises.

    • Concessional Registration Charges: concessional rate of CAD 1 per CAD 18,182 on registration charges for all loan documents, lease deeds and sale deeds.

    • Power Tariff Concession: Industrial Power Tariff (instead of commercial power tariff) will be applicable to registered KESDM companies to set up in Karnataka and other associated industry within the state.

    • Subsidy for setting-up ETP: An upper limit of approximately CAD 909,090 in case of startups and MSMEs and CAD 1.81 million in case of large and mega enterprises.

Data Centre Policy 2022-2027

As the data centre industry continues to evolve and expand, Karnataka’s progressive policies offer a competitive advantage, making it an attractive location for global retailers looking to set up and expand their operations.

Key Incentives and Offerings for Foreign Retailers:

    • Capital Subsidy: Data Centre Units outside the Bengaluru urban district are eligible for a one-time 7% capital subsidy, up to approximately CAD 7.14 million, on the value of fixed assets, excluding land and building. This subsidy is disbursed annually within 5 years, with an annual ceiling of approximately CAD 1.43 million.

    • Land Subsidy: Data centres outside the Bengaluru urban district can receive a 10% land subsidy on the purchase or lease of land, capped at 10 acres. The maximum amount of land subsidy is 10% of the total land cost or approximately CAD 2.86 million, whichever is less.

    • Exemption of Stamp Duty: A 100% exemption on stamp duty for up to 10 acres of land is available for data centres outside the Bengaluru Urban district.

    • Concessional Registration Charges: Data centres outside the Bengaluru Urban district are subject to a concessional registration charge of CAD 0.001 on registration charges for loan documents, lease deeds, and sale deeds.

    • Exemption of Land Conversion Fees: Data centres outside the Bengaluru Urban district are eligible for a 100% exemption of land conversion fees when converting land from agricultural use to industrial.

    • Power Tariff: Data centres with a minimum of 30% green energy component in total power consumption are eligible for the Industrial Power Tariff, instead of the commercial power tariff, applicable for IT/ItES entities.

    • Green Power Tariff Reimbursement: Data centres using energy from renewable sources above 50% will be reimbursed CAD 0.009 surcharge per unit for 5 years. Data centre entities shall be eligible for green power tariff reimbursement of up to 5MW, capped at CAD 285,714.

    • Exemption from Electricity Duty: A 100% exemption for 5 years from the month of commencement of commercial operation is available for data centers.

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