Industrial Policy 2025-30: Seeking to redefine job creation, Karnataka bets big on AI

Karnataka has taken a progressive step forward with its 2025-30 Industrial Policy, which seeks to leverage the power of artificial intelligence (AI) while ensuring job security.

Acknowledging the increasing role of automation across industries, the state introduced a balanced strategy that encourages investment while maintaining employment opportunities in an era of rapid technological change. The policy recognises the growing impact of AI and automation in industries ranging from high-tech manufacturing to traditional services.

AI-driven automation is already transforming fields such as medical equipment, smartphone production, chipmaking, and even service-oriented industries like massage therapy.

Instead of resisting this inevitable shift, Karnataka’s leadership is proactively adapting to the evolving labour market, aligning with global trends seen in Japan and Germany's Industry 4.0 initiatives that integrate automation into manufacturing. A key aspect of the new policy is its updated approach to job creation requirements. Previously, businesses had to generate 50 jobs per Rs 50 crore investment to qualify for incentives. The new policy adjusts this to 25 jobs per Rs 50 crore, acknowledging the potential job displacement caused by automation and AI.

However, this adjustment is not uniform. The policy follows a tiered system, requiring larger investments to generate more employment opportunities. Under this, mega enterprises investing Rs 300 crore must create 150 jobs, and ultra-mega enterprises investing Rs 1,000 crore must generate 500 jobs, plus six additional jobs per Rs 50 crore invested.

This structured approach ensures both investment growth and employment generation remain integral to Karnataka’s industrial development. Industries Minister M.B Patil had said, "AI and automation are reshaping industries worldwide.”

Patil emphasised that while AI could displace certain jobs, it also creates new opportunities. Karnataka’s policy seeks to strike a balance between innovation and employment by attracting investment while ensuring the workforce benefits from technological advancements.

“This perspective aligns with global discussions on the future of work. The World Economic Forum’s 'Future of Jobs Report 2023' highlights the need for reskilling and upskilling to manage the impact of automation. Sebastian Thrun, co-founder of Google X, recently shared similar insights at the Invest Karnataka Summit, predicting that while AI will replace some jobs, it will also create new ones. The OECD( Organisation for Economic Co-operation and Development) has extensively studied the effects of AI and automation, providing key recommendations that resonate with Karnataka’s policy approach,” remarked industry and space expert Girish Linganna.

The OECD emphasises education and training to equip workers with skills that complement AI, such as critical thinking, problem-solving, and creativity. Karnataka’s focus on reskilling and upskilling is in line with this recommendation. It also states that AI should benefit society as a whole, without widening inequalities. Karnataka’s policy includes gender inclusivity incentives, ensuring a more equitable workforce. However, additional measures may be needed to address disparities among different social groups.

The OECD also highlights the importance of trustworthy and transparent AI systems that uphold ethical standards and human rights.

“Karnataka’s policy could be further strengthened by incorporating specific guidelines for ethical AI usage. Karnataka’s job creation incentives and training initiatives align with international strategies like Singapore’s SkillsFuture, which supports lifelong learning for workforce adaptation,” pointed out Linganna.

Experts point out that beyond tackling automation challenges, Karnataka’s policy also prioritises gender inclusivity in the workforce. Companies employing a higher proportion of women will receive additional incentives, promoting a more diverse and representative industrial sector. This aligns with global movements advocating women’s participation in the workforce, such as the United Nations’ Sustainable Development Goals (SDGs), which emphasises gender equality as a key driver of economic growth.

“Karnataka’s 2025-30 Industrial Policy reflects the state's forward-looking approach to economic development. By embracing AI-driven transformation, ensuring job creation, and promoting gender inclusivity, Karnataka is shaping an inclusive industrial ecosystem that benefits both businesses and workers,” observed Linganna.

Experts further point out that AI is here and will stay forever. It would take over jobs involving routine transactions and give rise to a new genre of jobs that involve training an AI bot, designing an AI bot, improving them and creating new models of AI. These jobs need people with high levels of skills involving mathematics, statistics, computer science and data science. As an immediate impact, some people will be rendered redundant.

Experts, however, view that the social security systems governed by the government authorities have to provide a safety net and pathways for those affected by the onslaught of AI. These people need a transition path for finding a new vocation. Most of them cannot acquire the skills needed for the new genre of jobs that would come up; however, they could be skilled in areas which need human interactions in functions such as sales, service, and caregiving.

“Going forward, as our per-capita income rises, demand for hospitality, entertainment, fashion, art and lifestyle, tourism, healthy living and healthcare sectors will rise yielding new job opportunities. Digital methods of distribution of a service is going to rise; innovative solutions for a better lifestyle are going to evolve. All these developments will offer opportunities to the people who get displaced by the AI guerrilla. Our social security net has to facilitate this transition,” remarked Aditya Narayan Mishra the MD and CEO of CIEL HR.