The turnaround is the result of TN’s faster growth following the 1991 reforms, with its per capita GDP growing at 5.8 per cent per annum, compared to 4.7 per cent for India as a whole (1994-2023). The state has now set an ambitious target of becoming a $1 trillion economy by 2030, which would translate into a per capita GDP of around $13,000.
As TN goes to the polls next month, it is critical for the next government to understand the factors that have fuelled its economic ascent over the last 30 years, and what it should now focus on to further accelerate growth and achieve its trillion-dollar GDP target.
Fast-growing states are typically strong in growth-inducing attributes — social and physical capital, and the quality of governance. TN is no exception. It has the highest gross enrolment ratio in higher education at 50 per cent, compared to an average of 28 per cent for major states. TN has zero dropouts up to Class 8, and in secondary education, dropout rates are half the national average.
It also has one of the lowest rates of child stunting at 25 per cent, compared to the national average of 35 per cent, according to the National Family Health Survey-5. Nearly 100 per cent of its villages are connected by all-weather roads. TN has managed to build these strong fundamentals while keeping the budget deficit at 3 per cent of GDP, and it has one of the lowest violent crime rates in the country. There do exist some weak links, such as road availability, which is 30 per cent lower than the national average. The state still does not allow more than eight hours of work and has one of the highest minimum wages, at about ₹480 per day for non-agricultural work, compared to ₹300-350 in Gujarat, Karnataka and Maharashtra.
To the extent that these state-wide strengths in fundamentals also manifest in the state’s key economic centres (KECs), they become turbocharged, significantly boosting the state’s overall growth. TN has four such KECs — Chennai urban agglomeration (UA), Coimbatore, Madurai, and Tiruchirappalli —which cumulatively account for about 50 per cent of its GDP, and grew at 9 per cent per annum, about 3 per cent faster than the rest of the state (2002-23). This average outperformance of TN’s KECs, however, masks the fact that it is really the Chennai UA that drives this performance.
Chennai UA accounts for a third of TN’s economy and grew at 10 per cent annually between 2002 and 2023. This stellar growth of the UA was led by the Kanchipuram district (Chennai UA comprises three districts, including Kanchipuram), which grew annually at 12 per cent. Both manufacturing and business services contributed to this fast growth, growing at 60 per cent and 80 per cent faster than the respective state-sector growth (2002-2023).
Active state support has played a big role in Kanchipuram’s outperformance. It has the highest number of industrial parks in the state — eight out of 28 — including three major industrial parks. The Oragadam Park is famous for its automobile factories, with companies like Royal Enfield, Eicher Motors, and Daimler Truck. Sriperumbudur has emerged as an electronics hub since 2007 with factories of Samsung, Dell, and, more recently, Foxconn. And Siruseri is becoming an IT hub, especially after Tata Consultancy Services established its campus in 2012.
Realising Kanchipuram’s potential and developing it into an economic powerhouse reaffirms the salience of focusing on existing centres, as opposed to trying to develop new centres from scratch. However, TN has not been able to replicate the success of Kanchipuram in other KECs, with Coimbatore growing at 7.9 per cent followed by Madurai and Tiruchirappalli growing at 6.6 per cent and 6 per cent, respectively between 2002 and 2023.
This lack of dynamism is evident in Coimbatore’s share of the state’s manufacturing GDP, which declined from 23 per cent to 19 per cent (2002-2023). This is largely due to moderate specialisation in textiles in Coimbatore and weak specialisation in financial services in Madurai and Tiruchirappalli.
The work is cut out for the next government to achieve the 2030 vision. First, keep improving the state-wide growth attributes. Though TN is strong in most areas, they rank around the median level when compared globally. The percentage of stunted children in the state is almost double that of Thailand, while China’s gross enrolment ratio in tertiary education is 30 per cent higher. Second, develop Chennai UA as a world-class manufacturing and services hub. At around $100 billion GDP, it is still one-fourth the size of Guangzhou in China, indicating massive potential for growth. Third, alleviate constraints for faster growth of Madurai and Tiruchirappalli by deepening their specialisation in finance. Unleashing the growth of Coimbatore may require serious effort, since slower growth is endemic to all centres in India that specialise in labour-intensive industries. Tamil Nadu is a powerful story of how a state has turned around its economic performance by focusing on growth fundamentals. It should now take the lead and become the first $1 trillion economy in India.
The authors are economists. The views are personal
 "The country's foreign exchange reserves have risen by $311 billion since December 2018, when the tenure of Reserve Bank of India (RBI) Governor Shaktikanta Das began. This represents the largest forex jump under any governor to date. India now has th")