Economy of Bangalore
The Economy of Bangalore is an important part of the economy of India as a whole and contributes over 87% to the Economy of the State of Karnataka, accounting for 98% of the Software Exports of the State.
The establishment and success of high technology firms in Bangalore has led to the growth of Information Technology (IT) in India. IT firms in Bangalore employ about 35% of India's pool of 2.5 million IT professionals and account for the highest IT-related exports in the country.
One of the important factors spurring Bangalore's growth was heavy central government investment in Bangalore's public sector industries, partially because it is geographically out-of-reach from India's rivals Pakistan and China.
Diversity of Talent
Bangalore has traditionally housed several international technology firms, earlier ones being Texas Instruments, India. Bangalore houses a number of reputed engineering colleges producing high quality computer scientists, the Indian Institute of Management, Bangalore (IIMB), a top management Institute in India, the Indian Statistical Institute (ISI), the Indian Institute of Science (IISc), the Indian Institute of Astrophysics, the National Law School (NLSIU), The Indian Institute of Theoretical Sciences, National Institute of Fashion Technology (NIFT) and hence produces the most diverse young talent in one city, incomparable to any other city in the world.
The Silicon Valley Of India
Earliest startups that flourished in the city in the 90s are multi-billion dollar market capitalized companies on global stock exchanges like Infosys, Wipro Technologies, Mindtree being popular ones and smaller ones include Tejas Networks and so on. After two decades of domination by IT Services and regional offices of global technology companies, top talent began building new age firms between 2000-present. Flipkart, having originated in Bangalore, acquired several other e-commerce companies originated in Bangalore like Myntra and was itself eventually acquired by Walmart in 2018 for close to $20 Billion. Several other unicorns have their origins ln Bangalore like Swiggy, Ola Cabs, InMobi, Quickr etc. The remaining Indian unicorns have strong teams situated in Bangalore. Top venture capital funds have setup their India offices in the city to find opportunities to invest in startups.
Food: The city has several types of entrepreneurial pursuits that have shaped it along the way from early 90s. The city is known for several restaurateurs who innovated on fast service models popularly called Darshini restaurants that served hot breakfast and beverages. Orkla foods, the Norwegian foods company bought MTR Foods, traditional ready to eat consumer goods brand in 2007 for approximately $60m. A recent $100m brand is ID foods, fast becoming popular in retail. Swiggy, an on-demand food delivery Unicorn is popular along with Zomato, a restaurant review, listing and food delivery business, that initially started in Bangalore. FreshMenu is a near unicorn cloud kitchen business that only delivers via mobile apps and other on demand food apps. Cafe Coffee Day, a listed entity is Bangalore's iconic coffee store chain with stores in Prague, Bratislava, Riga and Warsaw. Chai Point is a chain of tea stores founded in Bangalore in 2010.
Real Estate: Several Venture Capital funded startups like housing.com, nestaway, commonfloor.com (acquired by the Unicorn, Quikr) are disrupting the rental marketplace in India. Several listed real estate brands have their origins in the city like Prestige Developers, Brigade Enterprises, Total Environment and Sobha Developers.
Aerospace: India's largest indigenous OEM, Hindustan Aeronautics Limited (HAL) had its headquarters in India. Several smaller tier 1 and tier 2 suppliers had their base in the city to serve the OEM need. The National Aerospace Laboratories (NAL) is also headquartered in Bangalore and is dedicated to the development of civil aviation technologies. Bangalore also housed now defunct full service airline brand Kingfisher Airlines, which acquired another airline startup, Air Deccan, a budget airline.
Space: The Indian Space Research Organization (ISRO), one of the top national space agencies in the world is headquartered in the city. ISRO is recognized world over for its indigenous capabilities in launching low cost satellites using its own launch vehicles, the PSLV and the GSLVs. ISRO has a record of deploying 104 satellites in orbits successfully in a single launch, which is a world record. ISRO has also launched a Mars mission, Mars Orbital Mission, which was the lowest cost inter-planetary orbital mission. Startups have made attempts to launch lunar rovers and are analyzing satellite images to uses in agriculture and climate.
Transportation: Bangalore is the home of India's first electric car brand, Reva was acquired by a large domestic car company, Mahindra & Mahindra. Several startups in automotive services, marketplaces are situated in the city. On demand taxi service, Ola Cabs, a Unicorn, originated in the city and acquired its early competition and peer, taxiforsure. Bounce is an on demand motorbike startup originated in the city. Zoomcar is on demand inter city car transportation startup running out of the city. RedBus is a inter city bus aggregator that was bought by Naspers group.
Grocery: BigBasket.com, Zopnow.com and Zopper.com, started in on demand grocery and compete with Amazon's Prime Now platform. Offline, formal retail format grocers originating from the city includes FoodWorld supermarkets that started in 1996 and several other local brands.
Retail: Urban Ladder is a leading omni channel commerce furniture retailer founded by entrepreneurs from the city. Lifestyle, now part of Dubai based Landmark group originated as a brand in Bangalore in 1999. Tanishq is a jewelry retail store brand and is owned by the Tata Group. Printo is a chain of stationery and printing services stores.
Fintechs: Several fintechs have their origins in the city. The revolutionary low cost brokerage firm Zerodha, several cryptocurrency exchanges. Pine Labs is a recent unicorn that builds POS systems. Capillary Technologies is a loyalty, analytics provider built over POS systems. QwikCilver, a gifting and loyalty platform founded in Bangalore was acquired by Amazon.Razorpay is a fast growing payment processor founded in the city.
Beverages, Beer and Spirits: The city is known for its craft breweries, popular ones being Toit, Arbor Brewing Company and others. Kingfisher is one of the worlds largest beer brands that originated in Bangalore. Amrut is India first Single Malt Whisky brand that is sold all over the world and was named as the number three whisky in the world in 2010.
Biopharmaceuticals: Biocon is one of India's largest bipharmaceutical companies which also owns a majority stake in India's largest Clinical Research Outsourcing (CRO) company Syngene International that works with global pharmaceutical majors. Strides Arcolab manufactures pharma products for emerging markets and is a listed entity in the Indian Stock Markets. The Himalaya Drug company makes several pharma and beauty care products and is headquartered in Bangalore.
Consumer goods: Wildcraft, a fast growing outdoor adventure goods company was founded in the city. Zivame is an online commerce lingerie company fast growing into the number 1 brand in India. The iconic Kissan jam and ketchup brand has its origins in Bangalore.
Healthcare: Narayana Hrudayalaya, a listed business, is a popular hospital chain that was built by renowned Bangalore cardiac surgeon. Portea Medical , Practo are some of the fast growing startups in the space. Cloud Nine is a chain of fast growing maternity and childcare brands founded in the city in 2007.
Logistics: DTDC is an asset light logistics company built by first generation entrepreneurs in the city
Feature Films: Lucia is a Kannada movie that is renowned as the India's first crowdsourced movie. The movie was extensively shot in and directed by Bangalore teams.
Fitness and Sports: There are many sports facility aggregators where consumers can book indoor courts or swimming pool slots like Playo. Many entrepreneurs are setting up sports facilities due higher interest in fitness. There is a fitness chain called CureFit, invested in by early entrepreneurs and restaurants attached like EatFit.
Agriculture: Many wine yards are springing up around the city due to interest among a globally aware community of people residing in the city. Bangalore is also India's largest export of roses, about 70% of all rose exports come from the city.
Economic zones in the city
There are several economic clusters, as in many cities in the world, in the city.
- Chickpete area is known for textile trades and early entrepreneurs in the city
- Shivajinagar area houses auto spares and services clusters
- Whitefield was a neighboring town to Bangalore, but over time has been assimilated into the city. Whitefield houses several Information Technology Parks and many global firms have their India headquarters located in the area.
- Koramangala and JP Nagar have traditionally been the area where tech startups take birth
- Electronics City houses all the major IT service providers of India
Indian headquarters of global giants
Bangalore is home for R&D centers of large Corporations, outsourcing divisions run by Indian service providers to cater to global markets. Most business processes require technology and Bangalore is the place with the supply of quality engineers needed to build these systems. Most developed markets do not have the supply of computer scientists needed to automate their business processes needed to scale. All top names from the West Coast have Indian offices in the city.
In a recent move, many back office technology and infrastructure operations of large investment banks around the world are run out of the city owing to talent to manage their data centers and proximity to other service providers.
Aerospace and Aviation industries
Bangalore also called the aviation monopoly capital of India. It accounts India's more than 65% aerospace business. World Aerospace giants such as Boeing, Airbus, Goodrich, Dynamatics, Honeywell, GE Aviation, UTL, others have their R&D and Engineering centres.
Long before Bangalore was called the Silicon Valley of India, the city made its name as headquarters to some of the largest public sector heavy industries of India. The Hindustan Aeronautics Limited (HAL) headquarters is in Bangalore, and is dedicated to research and development activities for indigenous fighter aircraft for the Indian Air Force. With over 9,500 employees, it is one of the largest public sector employers in Bangalore.
Today, HAL manufactures, under license, various fighter aircraft for the Indian Air Force (IAF) including Sukhoi 30 Flankers and Jaguars. HAL also develops indigenous products for the IAF such as HAL Tejas, Aeronautical Development Agency, HAL Dhruv and HAL HF-24 Marut.
The National Aerospace Laboratories (NAL) is also headquartered in Bangalore and is dedicated to the development of civil aviation technologies. Incorporated in 1960, NAL often works in conjunction with the HAL and has a staff strength of over 1,300 employees. NAL also investigates aircraft malfeasance.
A 1,000-acre (4.0 km2) special economic zone for the aerospace industry is being set up near the Bangalore International Airport. Bangalore was also home to large domestic airlines - now defunct Simplifly Deccan and Kingfisher Airlines.
Other heavy industries in Bangalore include Bharat Electronics Limited, Bharat Heavy Electricals Limited (BHEL), Indian Telephone Industries (ITI), Bharat Earth Movers Limited (BEML), HMT (formerly Hindustan Machine Tools), Hindustan Motors (HM) and ABB Group.
Bangalore houses many small and medium scale industries in its Peenya industrial area that claimed to be one of the biggest in Asia 30-years ago; newly including Apple's India manufacturing plant - the only active plant outside of China.
Biotechnology is a rapidly expanding field in the city. Bangalore accounts for at least 97 of the approximately 240 biotechnology companies in India. Interest in Bangalore as a base for biotechnology companies stems from Karnataka's comprehensive biotechnology policy, described by the Karnataka Vision Group on Biotechnology. In 2003-2004, Karnataka attracted the maximum venture capital funding for biotechnology in the country - $8 million. Biocon, headquartered in Bangalore, is the nation's leading biotechnology company and ranks 16th in the world in revenues.
Institute of Bioinformatics and Applied Biotechnology (IBAB), initiated by Biotechnology vision group, ICICI and Biocon (located at ITPL) is trying to shape revolutionary scientists in the field.
Like the software industry which initially drew most of its workforce from the local public sector engineering industries, the biotechnology industry had access to talent from the National Center of Biological Sciences (NCBS) and the Indian Institute of Science (IISc).
And Indian Biotechnology Research Organisation (IBRO) is recently under process of development to boost Biotechnology Growth in India, providing the Advanced Research and Talent pool to India from IBRO, whose mission and vision is Research and Development in Biotechnology to make India as a Global Leader in Biotechnology.
Other Major Biotechnology company based out of Bangalore is Advanta India.
Government Incentives and programs
Tax holiday for IT services: Government of Karnataka was the first state Government to introduce a tax holiday for IT services companies to setup shop in the city to earn a decade long Corporate tax holiday to incentivize the industry. Political maturity and motivation was key to achieve early support in this direction.
IT SEZ program: Server IT Special economic Zones are now setup where they receive a corporate tax holiday if offices are situated in those zones
Ministry of IT: One of the early states in India to have a Ministerial position for Information Technology. This was created to address the issues faced by the industry in terms of physical and digital infrastructure, education, supply of graduates and so on.
Adoption of Technology in Government programs: Multiple government initiatives have included digitization of citizen programs and Karnataka has been at the forefront of adoption of technology. The Regional Transport Office in the city are fully computerized and they the earliest to do so. Bangalore also achieved full computerization of the Indian Passport Distribution process, first in the country.
The digital office of the Income Tax Department of India is based in Bangalore. The need for build of systems to collect and refund taxes for millions of citizens and need for data analytics and AI to prevent fraud meant that Bangalore city was an obvious choice for the same.
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