Tamil Nadu: a trendsetter for all-round development

Even in the field of institution-building, the State is a trendsetter, as it had, within two years of freedom, set up what is now called the Tamil Nadu Industrial Investment Corporation (TIIC) to handle long-term financing. This was accomplished when the existence of such a State-level body was largely unheard of in the country. The TIIC’s presence came in handy very shortly, as K. Kamaraj, who was Chief Minister of the State from 1954 to 1963, had realised that capital in his State was poor and shy. To overcome this limitation, he enabled the Corporation to participate in the share capital of private enterprises, an action described as “bold and imaginative” by R. Venkataraman, who was the Industries Minister during 1957 to 1967, in an article in The Hindu on July 15, 1964. Building on what it did with school education in the early 1980s, the State, in the mid-1980s, opened up higher education to the private sector, facilitating the formation of a number of engineering and medical colleges. Naturally, the State has developed a solid network in certain aspects of professional education: as of now, there are 22 self-financing private medical colleges, four private universities, and 13 colleges affiliated with deemed-to-be universities. In engineering and architecture, there are 429 self-financing colleges, apart from 11 government colleges. 

Accounting for 4% of India’s land area and 6% of the country’s population, Tamil Nadu contributed 9.21% to the national GDP in 2024-25, ranking second only to Maharashtra. Its Gross State Domestic Product (GSDP) at constant prices (2011-12 series) reached about ₹17.23 lakh crore, reflecting the real economic growth of 11.19% over the previous year. In fact, the State was the only one to register a double-digit growth rate in the year in question, besides having the growth rate in double digits after a gap of 14 years. Broadly, the respective shares of the primary (agriculture and allied activities), secondary (industry), and tertiary (services) sectors in the GSDP of the State are 13%, 34%, and 53%.

Prime mover in irrigation

At the time of Independence, Tamil Nadu’s economy was essentially agrarian. Served by the inter-State and contentious river Cauvery, the central region of the State, encompassing districts such as Thanjavur, Tiruvarur, Mayiladuthurai, and Nagapattinam, had a well-developed irrigation network nearly 2,000 years ago. Even though it had undergone a number of changes over the years, the infrastructure was robust at the beginning of the 20th century CE. The Supreme Court judgment of February 2018 on the Cauvery dispute states that prior to 1924, when the inter-State agreement was signed between Tamil Nadu, the lower riparian State, and Karnataka, the upper riparian State, the area under irrigation in the former was about 15 lakh acres, whereas the latter’s coverage was hardly one-third of that. The delta’s importance can be seen from the fact that the region, regarded as the rice bowl of the South, accounts for about one-third of paddy cultivation in the State — 18 lakh acres out of a total of 52 lakh acres. Needless to say, paddy has been the primary crop of the farmers in Tamil Nadu.

A farm worker transplants Kuruvai paddy using a pumpset for irrigation at Sukkumbar village, near Tiruchi.
| Photo Credit:
B. Velankanni Raj

It was during the immediate post-Independence period that Tamil Nadu found that there were not many irrigation schemes for the drought-prone areas in the western belt — Coimbatore, Tiruppur, and Erode districts. This led to the birth of the Parambikulam-Aliyar Project (PAP) after an inter-State understanding with Kerala in 1958 over the diversion of west-flowing rivers to irrigate the western region of Tamil Nadu. A towering figure of the Congress, C. Subramaniam, who hailed from the region, played a key role in getting the project off the ground. He occupied high positions both in the State government — Finance Minister (1952-62) — and at the Centre — Minister for Steel, Food and Agriculture, Planning and Finance (1962-67 and 1971-77). Now hailed as a symbol of inter-State cooperation, the PAP irrigates about 4.2 lakh acres. With the conjunctive use of groundwater, farmers under the PAP are “far more enterprising” than their counterparts in the Cauvery delta, says a senior water expert, adding that the western region’s agriculturists have also taken to micro-irrigation to a substantial extent.   

It is not just that. Many of the farmers have diversified from agriculture into industry and higher education. Such diversification does not seem to have happened elsewhere in Tamil Nadu, even though in other regions of the State, including the northern districts, millets, pulses, and sugarcane are raised in a substantial way, besides paddy. While the increasing trend of mechanisation and the adoption of the System of Rice Intensification (a method aimed at lower utilisation of water, seeds, and other inputs) are among the recent features of farming in the State, chronic and widespread characteristics of the agricultural activity, as seen elsewhere, are also present. They include the predominance of marginal landholdings, an unreliable climate, and the paucity of agricultural labour. Still, Tamil Nadu is regarded as one of the major States with productivity higher than the all-India average in oilseeds, groundnut, sugarcane, maize, and paddy, according to the Agricultural Statistics at a Glance (2023) published by the Department of Agriculture and Farmers Welfare of the Union government. Even though the State does not produce cotton in large quantities, it is home to the largest number of spinning mills. 

Birth of industrial estates 

In one of his talks in Chennai during August 1990, Venkataraman, who, by then, had become President of India, recalled that “apart from the textile industry and a few sugar factories, there were no major industries worth mentioning at that time [in the early 1950s]. Modern small industries using power and up-to-date machinery and employing specialised methods were almost absent. Madras was regarded as a benighted agricultural province, with little power, capital and infrastructure. The provincial administration also lacked enterprise. It refused to buy up the Madras Tramways which was closing down [in April 1953] for a sum as low as Rs. [sic] 19 lakh.” It was against this backdrop that the Congress government, under Kamaraj’s leadership, launched a “massive programme” of industrialisation, Venkataraman recounted.       

In an article published in The Hindu on September 1, 1965, RV, as the former President was also called, explained the rationale behind the government intervention, citing the “scanty availability” of natural resources, the need for transporting raw materials and fuel over a long distance, and the reluctance of the small entrepreneurial class to invest. This was why a “string of industrial estates”, as phrased by RV in his Chennai speech, came into being, paving the way for a vibrant micro, small, and medium enterprises (MSMEs). Today, the Tamil Nadu Small Industries Development Corporation Limited (TANSIDCO) maintains 135 Industrial Estates spread over nearly 8,880 acres. As for the strength of MSMEs, which have registered themselves with the Udyam portal of the Union MSME Ministry, there are about 33.6 lakh — around 70% of them being in services. As an indication of Tamil Nadu’s model of inclusive growth, 30% of MSM entrepreneurs are women. With respect to the social mix of ownership of around 8.56 lakh units, as recorded by the Office of the MSME Development Commissioner in the Union government as of March 31, 2022, Other Backward Classes (OBCs) in the State owned around 3.37 lakh MSMEs, accounting for approximately 40%, and Scheduled Castes (SCs) owned 50,908 units, or about 6%.

The commissioning of the Parambikulam Aliyar Project work was held at the Parambikulam Dam site on the January 12, 1967.
| Photo Credit:
The Hindu Archives

Commenting on RV’s work as Industries Minister (1957 to 1967) of the State, veteran industrialist T.T. Vasu wrote in The Hindu on August 8, 1991: “A variety of industries, big, medium, and small, dotted the landscape. Aluminium, steel, chemicals, paper, ceramic, automobile, and other engineering industries came up.”  The process of industrialisation, initiated during the Congress regime, has been carried forward by the successive DMK and AIADMK governments with varying degrees of enthusiasm and interest. The cumulative impact of such an approach is quite positive: Tamil Nadu has become the country’s most industrialised State with the highest number of factories (39,700), employing 2.8 million people, according to the Invest India portal of the Union government. It is the foremost exporter of electronic goods, accounting for over 30% of India’s electronic exports. In terms of total exports from the State, the value was around $52 billion in 2024-25. 

The Kudankulam Nuclear Power Plant in Tirunelveli.
| Photo Credit:
SPECIAL ARRANGEMENT

Among the important Central sector projects that the State witnessed during the 1950s and 1960swere: the Integral Coach Factory (ICF) in Chennai, where the country’s first hydrogen-powered train coach was tested in July 2025; the Neyveli Lignite Corporation, which has power units of about 3,400 megawatt (MW) in Neyveli; and the Bharat Heavy Electricals Limited (BHEL) in Tiruchi, which operates across the power and industrial sectors, offering comprehensive solutions, including the supply of equipment, systems, and services. In the last 20-odd years, the Kudankulam Nuclear Power Project, where two units of 1,000 MW are in operation, has been taken up by the Union government. Four more units of 1,000 MW each are being established. 

The State’s total installed electricity capacity from all sources of energy stood at close to 40 GW in 2024-25, of which conventional sources accounted for 16.7 GW and renewable energy, 23 GW. Again, a pioneer in tapping wind energy, the State’s installed wind capacity was 9.3 GW, and solar 10 GW. As the Tamil Nadu Power Distribution Corporation has about 30.44 million consumers, including over 20 million domestic consumers across the State, the government should create regional distribution companies for quicker and better delivery of services. The construction sub-sector is expanding at more than 5% per year, further driving demand for energy and natural resources. 

Thriving services 

Tamil Nadu’s services (or tertiary) sector is diverse and includes several sub-sectors such as trade, repair, hotels and restaurants, transport, storage, communication and broadcasting services, financial services, and real estate. The State, with its strong presence in the IT and IT-enabled services sectors, is a major contributor to software exports. Like other States, the service sector plays a pivotal role in driving Tamil Nadu’s Gross State Value Added (GSVA). In 2024-25, the services accounted for ₹8.13 lakh crore at constant prices (base year: 2011-12), contributing about 53% to Tamil Nadu’s total GSVA. Placed next to Karnataka, Maharashtra, and Telangana in software exports, the State saw a steady increase in this segment of exports from ₹46,704 crore in 2019-20 to ₹73,969 crore in 2022-23, according to the Tamil Nadu government’s Economic Survey for 2024-25. The degree of heightened economic activity in the State can be observed from the credit-deposit ratio (CDR) with credit exceeding deposits. The Survey points out that in 2023-24, Tamil Nadu disbursed credits of ₹15,82,851 crore, whereas it received deposits of ₹13,44,553 crore. Naturally, it is among the top three States with regard to the CDR. Despite having four international airports, Tamil Nadu missed the bus about 10 years ago vis-à-vis Karnataka and Telangana when it came to upgrading its largest airport, Chennai Airport. Now, steps are under way to build a greenfield airport in Parandur. The Chennai Metro Rail Limited (CMRL) has seen steady expansion over the years, enhancing urban mobility and connectivity. The State government has sought approval from the Union government for Metro Rail projects in Coimbatore and Madurai. As regards the road sector, the total length of roads in the State is 74,955 km, including the National Highways’ share of 6,805 km.

The Integral Coach Factory (ICF) in Chennai, circa 1995.
| Photo Credit:
The Hindu Archives

In retail trade, the State became known, by the late 1980s, for having sprawling retail outlets, the likes of which were not seen in many other places. This came about well before the concept of malls caught up with many cities across the country. The standalone sprawling retail showrooms, as found in T. Nagar (Chennai’s central business hub), are distinct from malls. One of the important constituents of the services sector is the film industry, which has been playing a crucial role in many aspects of life in the State, including politics. Once the centre of south Indian feature films, Chennai housed legacy studios such as Gemini, Vijaya-Vauhini, and Prasad. According to an estimate, Tamil cinema generated ₹3,500 crore in 2023, covering collections from cinema halls, OTT platforms, and music rights.

It is a tribute to the political, administrative, and social environment of Tamil Nadu that there are about 130 global Fortune 500 companies in the State. Nearly one-third ($6.8 billion) of the country’s exports in automotive and auto components comes from the State, according to a document of the Tamil Nadu government. The State also produces 25% of the country’s passenger cars and 36% of two-wheelers. The incumbent DMK government, besides formulating a number of well-meaning policies, has also been giving importance to skill development.  

Inter-regional disparity

However, the State is facing a number of challenges in all three broad sectors of the economy. The Economic Survey captures some of these challenges — namely, climate change, demographic shifts, technological disruptions, and changing employment landscapes. Inter-regional disparity is particularly glaring. Although the State’s overall per capita income of ₹2.78 lakh (2022-23) is higher than the national average of ₹1.69 lakh, 30 of the 38 districts in the State have a lower per capita income than the State’s average. 

The Survey goes on to state that Tamil Nadu “also needs to concentrate on developing rural entrepreneurship to spread growth across all the districts of the State. It should leverage its demographic advantage by increasing the skill endowment of the youth, encouraging women to participate in the workforce, and promoting high-value manufacturing and services, including frontier technologies,” the document adds. 

Given the State’s long coastline extending for 1,076 km, and the extent of effective inland water resources over 3.85 lakh ha, K.R. Shanmugam, former Director of the Madras School of Economics, suggests that fishing — both marine and inland — be promoted more actively than it currently is. In the dairy sector, there is enormous scope for improvement, as the State is placed 11th at the all-India level in milk production, despite having a well-established network of cooperative societies in rural areas (numbering around 9,300) for milk procurement.  

Southern districts, which represent 18.8% of the economy and 20.5% of the population in the State, have been lagging behind others due to a variety of reasons, including chronic water shortage. A senior official of the State government feels that the situation will change for the better, as a number of measures are being taken to correct it. The southern region may witness transformation once the All India Institute of Medical Sciences (AIIMS) hospital  in Madurai becomes fully operational and the Thoothukudi port acquires a greater role in the State economy, the official hopes, adding that the potential for adventure tourism, heritage tourism, and eco-tourism has not yet been fully tapped. 

MGNREGA labourers at work in Salem.
| Photo Credit:
E. LAKSHMI NARAYANAN

Speaking of issues being faced by women in the State, the Survey points out that “despite having one of the highest Labour Force Participation Rates (LFPR) for women in India, there is still considerable scope to increase this rate. The gross enrolment rate for women in tertiary education is one of the highest in the country, but the participation of such skilled women is relatively low.” 

Tamil Nadu, having achieved substantial progress in many fields, is at a crossroads, as the State must go a long way in eliminating inter-regional disparities and ensuring economic equity. It is up to the political leadership, intelligentsia, and civil society to rise to the occasion and make Tamil Nadu number one in every aspect of life.

Economic growth: A comparison

Source: Documents from the Union Planning Commission, Tamil Nadu Planning Commission, and Finance department of the Tamil Nadu government