Bangalore city, the most prosperous in South India, the tech hub and Silicon Valley, saw top multinational corporations from the US, UK, Australia, and Europe set up their companies and offshored their jobs for backend services. The city, now named Bengaluru (in local dialect), has experienced unprecedented growth since the 1990s. It was once referred to as ‘garden city’ and ‘pensioners paradise’, but saw a boom in real estate as top MNCs set up their base.
The city, which generates major high-paying jobs in the IT sector, is now choking in its own success. Employment opportunities have made everyone enter the city, especially from North India, in the hopes of bagging high-paying jobs. This has led to massive migration within the country, making the city chock-a-block. The Karnataka government has now announced a policy where it pays start-ups, fintech firms, and US companies to leave Bangalore and set up bases in tier-2 cities within the State.
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Karnataka Government to US Companies & Start Ups: ‘Move Out of Bangalore & We Will Provide Tax Rebate & Other Incentives’
The Karnataka government aims to reduce the stress on Bangalore and is encouraging US firms to set up bases in Tier-2 cities. The cities include Mangalore, Mysore, Hubballi, Dharwad, Belagavi, Shivamogga, and Davanagere, among others. “The government is paying you to move out of Bangalore,” Investment Banker Sarthak Ahuja wrote.
“The Karnataka govt wants you to set up your tech startup in a tier 2 city like Mysore or Mangalore. And this is all part of the new IT policy,” he said. The government will spend $108 billion over five years to fund US companies that move out of Bangalore. It includes 50% reimbursement on rent, 30% property tax rebate for three years, 100% waiver on electricity bills for five years. Companies can also claim 25% back on phone and internet bills.
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It also announced a 40% reimbursement on Research and Development (R&D) expenses. It will also provide a rebate to sectors like AI, blockchain, and quantum computing. However, not all US firms are interested in moving out of Bangalore due to the infrastructure that is already built.