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In the past 3 years, the Nobel Prize successful Economics has been awarded to scholars who person shown that institutions, including societal institutions, substance for economical development. This thesis is not novel, but its designation is peculiarly applicable to India, wherever differentiation and favoritism based connected caste and sex proceed to persist successful the economical domain. This is existent of Tamil Nadu arsenic well, though to a lesser extent. The State has demonstrated however societal inclusion and economical improvement tin beryllium a mutually reinforcing process.
Tamil Nadu has done good connected some the economical and societal improvement fronts. With 6% of the country’s population, Tamil Nadu contributed 9.21% to the nationalist Gross Domestic Product (GDP) successful 2023-24. According to Reserve Bank of India (RBI) information connected Indian States, successful 2024-25, the State had the second-highest per capita Net State Domestic Product (NSDP) successful changeless prices (2011-12 prices) among large States.Tamil Nadu’s existent economical maturation complaint of 11.19% for 2024-25 marks the highest for immoderate State successful the country, too being the highest for the State successful the past 10 years. This economical dynamism, dissimilar that of different dynamic States similar Gujarat oregon Maharashtra, is arsenic backed by accordant improvements successful quality development.
The State has the second-lowest headcount measurement of poorness arsenic good arsenic the second-lowest multidimensional poorness index. The State besides ranks 3rd successful the Sustainable Development Goals (SDG) Index. Tamil Nadu has the second-highest gross enrolment ratio successful higher secondary acquisition and the highest successful tertiary education. It was ranked the champion successful the Social Progress Index (SPI) developed by the Institute for Competitiveness and Social Progress Imperative. This unsocial improvement trajectory has been sustained done simultaneous and spatially distributed investments successful hard infrastructure similar powerfulness and transport, arsenic good arsenic successful wellness and education. Tracing the cardinal economical achievements of the State since the pandemic, this effort goes connected to item the challenges that the State has to face to prolong its way of inclusive economical growth.
Balanced economical transformation
The State’s economical modulation is rooted successful a balanced enlargement of some its manufacturing and work sectors. Of note, however, is its manufacturing sector. During a play erstwhile manufacturing has not recovered its feet astatine the all-India level contempt respective measures, the State has emerged arsenic a exemplary of sustained manufacturing dynamism. It has been a large shaper and exporter of automobiles and car components, garments, textiles, and leather goods since the 2000s, and continues to beryllium so. While its competitiveness successful these sectors has a longer history, its occurrence successful electronics accumulation and exports is recent. It accounted for much than 41% of India’s electronics exports successful 2024-25, and is poised to instrumentality vantage of the ‘China-plus-one’ strategy of planetary electronics majors. Home to 7 of Apple’s 14 assembly and constituent firms successful India, the State has announced a abstracted argumentation for physics constituent production, seeking to embed the investments successful the State’s ecosystem, and thereby fortify section linkages.
The different caller improvement is the State’s emergence arsenic a hub for non-leather footwear production, with declaration manufacturers producing planetary brands similar Nike, Crocs, Adidas, and Puma. The enlargement of non-leather footwear accumulation has besides contributed importantly to the State’s accent connected spatially distributed growth. Unlike different fast-growing States, wherever economical enactment is concentrated astir a azygous metropolitan hub, Tamil Nadu’s economical improvement is much evenly distributed spatially. Clusters specialising successful circumstantial sectors are recovered to beryllium dispersed crossed the State specified arsenic Coimbatore, Tiruppur, Tiruchirappalli, Sivakasi, and Virudhunagar, helping span the urban-rural divide. The enlargement of non-leather footwear accumulation has further facilitated this by opening up organised manufacturing employment successful less-developed districts similar Perambalur and Krishnagiri.
The State has also, astatine last, met with immoderate occurrence successful its attempts to industrialise confederate Tamil Nadu. VinFast, a Vietnamese electrical car major, has begun to assemble vehicles successful Thoothukudi, portion a Korean steadfast is astir to motorboat non-leather footwear accumulation successful the aforesaid region.
Startup ecosystem
The caller impetus to amended the startup ecosystem has led to a multi-fold summation successful the fig of startups successful the State since 2021. From astir 2,000-odd registered startups successful 2021, the fig has changeable up to much than 12,000 successful 2025. Through the mounting up of StartupTN, a Section 8 institution arsenic portion of the Tamil Nadu Startup and Innovation Mission (TANSIM) successful 2021, on with supportive argumentation reforms, the State has managed to alteration the ecosystem. According to a survey commissioned by the State Planning Commission, Government of Tamil Nadu, astir entrepreneurs study having studied successful publically funded acquisition institutions for their tertiary education, highlighting the important nexus betwixt the State’s investments successful acquisition and entrepreneurship. In fact, the survey reports that, connected average, the prime of the startup ecosystem tends to beryllium amended successful authorities institutions than successful the backstage sector.
Again, dissimilar the ascendant exemplary of Indian entrepreneurship, wherever kinship ties thin to beryllium a cardinal root of concern partnerships, the survey points retired that 58% of startup partnerships were formed done non-kinship ties, with 28% of the partnerships formed betwixt friends, followed by ties formed successful acquisition institutions, workplaces, and different nonrecreational networks. The State has besides initiated the Tamil Nadu Technology Hub (iTNT) successful 2023 to beforehand startups successful deeptech sectors arsenic good arsenic forge collaborations betwixt academia and manufacture successful specified sectors.
Agriculture and services
Given the State’s occurrence successful structural transformation, the stock of the agriculture assemblage successful the State’s Gross Value Added has fallen to astir 10% successful 2024-25. However, determination person been changes successful the creation of the assemblage with the livestock sub-sector accounting for a important stock astatine present. The State ranks 2nd successful ovum accumulation and sixth successful nutrient accumulation successful India. Within the harvest sector, determination has been a accelerated enlargement of horticultural crops successful presumption of value, though nutrient crops proceed to relationship for the bulk of the country nether cultivation. Though Tamil Nadu ranks precocious successful productivity successful respective of the crops it specialises in, the productivity levels person either stagnated oregon registered debased maturation for astir crops, but maize.
The stock of the services assemblage successful employment and the State’s GSDP is overmuch much aligned than successful different States. While IT and IT-enabled services, logistics, wellness services, and higher acquisition proceed to represent the high-end segments of this sector, determination person been changes successful caller years. The State has emerged arsenic a large destination for Global Capability Centres (GCCs), a high-value-generating constituent of the cognition economy. The fig of GCCs successful the State has much than doubled since 2021, and importantly, a fewer are being acceptable up successful the Coimbatore, Tiruchirappalli, and Madurai regions. Another effort to spatially dispersed services-based employment is done the mounting up of neo-TIDEL parks successful tier-2 locations similar Villupuram and Thanjavur. These are small-scale IT parks acceptable up to pat into the accomplishment sets of younker successful these locations.
Sustained structural transformation
Through this maturation process, the State has ensured a overmuch much palmy modulation of its workforce retired of low-productivity accepted sectors similar agriculture than immoderate different State. In fact, this modulation is peculiarly noteworthy successful caller years. Following the pandemic, astir States, including dynamic ones similar Gujarat, Maharashtra, and Karnataka, witnessed a reversal of the process of structural transformation. The stock of the workforce babelike connected agriculture accrued and continues to bash so, a improvement that earnestly undermines India’s claims to beryllium connected its mode to being a planetary economical powerhouse. Tamil Nadu is the lone large State that has sustained the process of structural transformation, with the stock of workers successful the superior assemblage falling from 27.9% successful 2021-22 to 25.1% successful 2023-24, according to estimates from the Periodic Labour Force Surveys (PLFS). This effectual translation is besides evident from the indicators of employment quality. Tamil Nadu ranks 2nd lone to Kerala successful this regard, having the second-largest stock of salaried workers successful the 20-59 property group. The stock has successful information accrued from 32.8% successful 2021-22 to 37.2% successful 2023-24, with the State having 12% much women workers successful regular employment compared to the all-India average. In fact, results from the latest Annual Survey of Industries bespeak that 40.3% of each straight employed women successful the Indian organised manufacturing assemblage successful 2023-24 are employed successful Tamil Nadu.
Nevertheless, going forward, the State needs to code the pursuing challenges to guarantee that it stays connected its way to becoming a socially inclusive dynamic economy.
The spot of the State’s concern ecosystem is based connected 2 pillars. The archetypal is the beingness of decentralised MSME clusters with sectoral specialisation, and the 2nd is the availability of a excavation of skills. | Photo Credit: REUTERS
MSMEs losing ground?
The spot of the State’s concern ecosystem is based connected 2 pillars. The archetypal is the beingness of decentralised MSME clusters with sectoral specialisation, and the 2nd is the availability of a excavation of skills. According to the Annual Survey of Unincorporated Sector Enterprises (ASUSE) of 2023-24, astir 23% of unincorporated enterprises successful the State relied connected hired labour for functioning, indicating economical dynamism. This was the second-highest stock among the States being compared, with the all-India mean astatine little than 14%.
While the MSME clusters person weathered galore crises, including demonetisation, the arbitrary imposition of GST, and the pandemic, a fewer caller developments airs caller challenges. The imposition of bonzer tariffs by the United States connected imports from India has deed this assemblage hard. Associations representing MSMEs specialising successful textiles, garments, and leather goods exports person expressed alarm implicit this trend, peculiarly amid the larger planetary displacement against commercialized openness. While this whitethorn spot a reversal, determination are deeper structural issues that telephone for argumentation attention.
This has to bash with the changing technological ground of manufacturing. The servitisation of manufacturing and the accelerated diffusion of integer technologies successful manufacturing marque the adoption of these technologies a necessity for MSMEs to prolong themselves successful a globally competitory environment. Industry 4.0 technologies person go indispensable for optimising production, minimising errors, and ensuring quality. Bigger firms person begun to follow specified practices, but marketplace uncertainties and bladed margins accruing to astir segments of the small-scale assemblage deter firms from undertaking investments successful caller technologies. This poses a conundrum. In the agelong run, this non-adoption implies increasing divergences betwixt the capabilities and productivity of the larger firms and those successful the small-scale sector. This would weaken their quality to vie successful planetary markets. In the abbreviated run, uncertainty successful returns connected specified investments forces the firms to instrumentality to known practices. State policies to code the barriers to adoption of Industry 4.0 technologies by the MSMEs are captious if Tamil Nadu is to prolong its broad-based concern basal and dynamism. Otherwise, the ‘industrialisation from below’ that has characterised the State’s manufacturing assemblage frankincense acold is nether threat.
Additionally, the clubbing of trading and manufacturing enterprises nether the MSME umbrella and the offering of akin incentives bash not augur good for manufacturing firms, arsenic these firms person a antithetic cost-margin-profit realisation structure. Further, arsenic Anand et al. (2025) constituent out, energy tariffs for MSMEs are highly regressive successful India, forcing them to wage much and, hence, undermining their competitiveness.
Youth employment
India is undergoing a demographic transition, with a rising stock of the working-age colonisation (Mehrotra & Parida, 2019). In bid to reap the demographic dividend, the maturation process indispensable make adequate, decent jobs, particularly for the youth. In this context, we analyse cardinal labour marketplace indicators for younker aged 15-29 for the periods 2017-18 and 2023-24 for Tamil Nadu and India, utilizing the 2017-18 and 2023-24 PLFS information (Table 1).
Table 1: Key labour marketplace indicators for younker aged betwixt 15 and 29 years.
Source: Authors’ calculations from PLFS 2017-18 and 2023-24.
The array shows that unemployment among some young men and women remains a large challenge. Though the State’s younker unemployment complaint declined sharply from 25.6% successful 2017-18 to 15.4% successful 2023-24, it is inactive substantial, indicating continued challenges successful absorbing young radical into productive employment.
The array further indicates pronounced sex disparities successful labour marketplace outcomes among young men and women. Young women consistently grounds overmuch little labour unit information rates and higher unemployment rates than young men. Nevertheless, the LFPR for young women successful the State has declined slightly. This is perchance owed to accrued information successful higher education. About 76.2% of young women successful the State were not successful the labour unit (NILF) successful 2023-24; among them, 37.8% were attending acquisition institutions and 36.3% were engaged successful home responsibilities.
A large situation is the persistent, sizable fig of youths who are neither successful employment nor successful acquisition oregon grooming (NEET). Table 2 reports NEET rates among younker aged 15-29 successful Tamil Nadu and India for 2017-18 and 2023-24, disaggregated by sex.
Table 2: Youth neither successful Employment nor successful Education oregon Training
Source: Authors’ calculations from PLFS 2017-18 and 2023-24.
In Tamil Nadu, 17.62% of young men autumn nether the NEET category, compared to 48.67% of young women, portion the corresponding nationalist figures are 13.2% and 56.24%. Between 2017-18 and 2023-24, NEET rates declined crossed each groups, but the wide signifier remains mostly unchanged. For young men, NEET rates fell to 9.35% successful Tamil Nadu and 7.94% nationwide, indicating an betterment successful their engagement successful employment oregon education. However, reductions among young women are acold much modest. In 2023-24, NEET rates among young women remained higher astatine 43.59% successful Tamil Nadu and 42.84% nationally. The higher unemployment complaint oregon non-participation is besides an denotation of the quality of younker to hold for amended employment opportunities arsenic a effect of the amended societal information nett successful the State. The employment challenge, therefore, lies not simply successful occupation instauration but successful creating employment that tin afloat leverage acquisition investments by the State and households and construe them into prime outcomes. There is an urgent request for the enlargement of policies that enactment education-to-work transitions and amended entree to decent employment.
Sustaining quality superior amid technological changes
The 3rd situation lies successful the quality of its educated younker to vie for high-skilled jobs. Tamil Nadu ranks 2nd successful the School Education Quality Index (SEQI) published by NITI Aayog and besides excels successful higher education. Apart from having 47% of younker modulation from higher secondary to tertiary education, the State has respective institutions successful the apical 100 ranks published by the NIRF. However, determination are respective issues successful the domain of education.
Again, the rapidly changing quality of the accumulation of some goods and services connected relationship of the revolutions nether mode successful integer technologies similar Artificial Intelligence (AI) is forcing accomplishment obsolescence successful unprecedented ways. The acquisition system, with its accent connected method education, has served the State good truthful far, but the grade to which ‘21st-century skills’ similar captious thinking, occupation solving, and effectual connection are efficaciously imparted successful the classrooms is suspect. An investigation of question papers of some engineering and arts and subject courses by the State Planning Commission shows that determination are hardly immoderate questions that evoke captious reasoning oregon problem-solving skills among students. The emphasis, to our mind, has to be, therefore, connected the ‘how’ of teaching alternatively than the ‘what’ of it. This calls for a large-scale revamp of the pedagogical and valuation practices, which, successful turn, remainder critically connected sustained improvements successful module competencies. Further, robust academic-industry partnerships are rare.
Ensuring societal inclusion
Even arsenic the State has the largest stock of youth, including women and little caste youth, successful tertiary education, employment opportunities for specified educated younker are not keeping pace. Further, the prime of acquisition successful presumption of employment readiness, the ranking of institutions, and the kinds of courses studied thin to beryllium biased against those from marginalised sections. Given that the abstraction for affirmative enactment successful employment is shrinking, determination is simply a compelling request to incentivise the backstage assemblage to enlistee from specified sections to guarantee that acquisition mobility translates into economical mobility arsenic well. Wage subsidies for students enrolled successful the Pudhumai Penn oregon Tamizh Pudhalvan schemes, successful conjunction with grooming nether the Naan Mudhalvan scheme, tin beryllium envisaged to code this mismatch.
On a akin note, fixed that agriculture continues to lend to the sustenance of a important stock of agrarian households, determination is simply a request to guarantee that productivity and prices proceed to stay a argumentation priority.
Suggestions for intervention
Tamil Nadu is unsocial successful presumption of its strengths successful some manufacturing and accusation and technology-related services. The State is, therefore, well-positioned to instrumentality vantage of the increasing request for the adoption of integer technologies successful manufacturing. However, barring a fewer idiosyncratic cases, determination is yet to beryllium a concerted nationalist effort to embed these interactions betwixt the manufacturing and integer exertion sectors wrong the concern ecosystem to afloat exploit their advantages. The iTNT hub is simply a bully inaugural successful this direction, but amended incentives should beryllium designed, particularly for the MSME sector, to promote the adoption of specified technologies.
To amended the world standards and besides forge effectual academic-industry partnerships, moving with the diasporic world community, among different things, whitethorn beryllium important for the State. The State’s agelong past of investments successful acquisition tin decidedly beryllium leveraged for this purpose. While hackathons are useful, some manufacture and world institutions request to beryllium incentivised amended to enactment together. A abstracted involution besides needs to beryllium designed to physique teacher competencies.
Finally, though the State ranks precocious successful ensuring regular employment for women, the precocious stock of educated women retired of the labour unit owed to home responsibilities needs to beryllium addressed. Public enactment for aboriginal kid care, aged care, and after-school attraction for children becomes imperative successful this regard. Different models of attraction whitethorn beryllium piloted, taking into relationship the beardown beingness of Anganwadi centres and SHGs successful the State.
This nonfiction is portion of The Hindu e-book. Tamil Nadu’s progress: economical maturation done societal equality
