Understanding how Tamil Nadu clocks 7% GDP growth, even today

Tamil Nadu is among one of the most developed States of India. It is quite true that there is massive corruption in Tamil Nadu. Yet, it always clocks upwards of seven percent GDP growth, year on year. How is this possible? This article attempts a few answers in this direction.


The Jallikattu protest at the historic Marina Beach, where hundreds of thousands of people got together to get Jallikattu celebrated after an appropriate amendment in law was touted as a "victory" for Tamil pride. It was symbolic of a bigger issue. The issue was simple: the Government of India sought to push down various projects that had a disastrous effect on superb fields, on rich agriculture. There were the methane menace and the hydrocarbon project. When the Supreme Court said no to Jallikattu, there was an upsurge of emotions. Tamil Nadu is very much advanced in agriculture, and none in the State will tolerate any challenge to its contribution to the economy. Yes, there is a big economy which is built around Jallikattu as well.

The facts are there for all to see. Better standards of education at the secondary level. Superb facilities to study up to the graduate and even postgraduate levels in fairly good Government colleges. At the professional level, there are a good one dozen deemed Universities that are also contributing to the continued supply of highly qualified technical manpower.

The Dravidian parties, in spite of all their corruption, had systematically built some infrastructure relating to the aforesaid parameters and had provided some basic amenities, that were collectively starting to find their feet -- economic miracles do not occur in a vacuum. For example, the standard of medical care in Government hospitals in many towns is far better than what is available elsewhere.

Finding buyers for so many services is necessarily segmented, But the volumes matter. This is exactly where Tamil Nadu scores. Specifically, we can focus on b) the Industrial clusters c) the service sector growth d) contribution of Chennai and Coimbatore e) the education boom f) effect of mobility on economic growth.

Industrial clusters

There are two main industrial clusters in Tamil Nadu. There are industries spread in other areas, but they are not as big as these two. One is Chennai. The other is Coimbatore. The Chennai cluster has at least twenty major companies. A good number of them are auto majors like Renault, Ford, Hyundai, and so on. The Sriprembadur and the Oragadam clusters, that are virtually part of the Chennai cluster also contribute to some 18,000 jobs if not more, directly, and at least three lakh jobs in the service sector. The huge conglomerates like the TVS group and the Murugappa group, alongside the Simpson group, for example, would provide direct employment to at least 40,00 people and around four lakh people indirectly. That all this money keeps rotating in Chennai, should be most importantly noted.

Chennai is also home to Tidel Park, one of India's largest IT parks, that has now made the Old Mahabalipuram Road, the center of all real estate development. This is a huge work in progress and, within the next five years, will witness massive growth, as it is now witnessing huge interest from people who hail from Mumbai, New Delhi and so on. The end user market is picking up here too.

Coimbatore is another major industrial cluster. It is built on private entrepreneurship. Except for one or two major groups like LMW and Pricol, the city does not have any major investment. Yet, there are hundreds who trade in everything under the sun. There are so many small manufacturing industries, for example, manufacturing a big range of wet grinders, mixies, electrical goods and so on. The textile ancillary industries are also present here.

There is the third industrial cluster of Hosur, near Bangalore, also picking up.

The service sector growth

Keen observers of the service sector growth count on a huge number of indicators. Just travel along the major highways to either Tiruchirapalli and beyond on NH45 or towards Bangalore on NH7. One can see hundreds of "Kumbakonam degree coffee" shops that sell not only the specialized coffee but also a huge range of vegetarian items..

The spin-off in the villages is also there. For the various companies in Sriperambadur, one can see hundreds of buses taking manpower from the villages, in Vellore and Kanchipuram districts, at least forty kilometers away. The highways help the smooth flow of traffic. It should be noted that the DMK Government, deliberately developed Sriperambadur some years ago, to minimize the crowd in Chennai. It is right on the Highway and this helps. Imagine the spin-off in terms of local economic development. This author has seen even small herbal beauty parlors coming up in villages with a population of around 14,000. The number of girls who visit these beauty parlors on Sundays is huge and all of them are employed at Sriperambadur. Most are doing their degree courses through distance education.

The number of small hotels in Tamil Nadu should become a case study by itself. Madurai is home to over 450-night shops, that do superb business between 6 PM on day one and 3 AM the next day. Reportedly, according to approximate estimates, at least eighty hundred thousand rupees change hands, within two days. This includes private orders for various parties. Most of it is non-vegetarian food. Madurai has earned the name of "thoonga nagaram"( the city that never sleeps), One should not discount the small shop culture. The likes of Big Bazaar or More can never enter the small villages.

We have just discussed the tip of the iceberg. There are hundreds of IIT JEE and NEER coaching centers, one four lakh small shops ( selling the most essential grocery items) and so on.

Contribution of Chennai and Coimbatore

Chennai city has expanded in the recent past. If one counts the extended area, the population would exceed 1.8 crore people, out of a total of around eight crore people, throughout the State. Coimbatore city has a population of around twenty lakh but when counts the growing suburbs, it would be double that number. The transport facilities to the extended suburbs are superb and this will continue. However, the story does not end with the growing numbers.

There are other engines of growth too. For example, the expansion of five-star hotels. It was initially thought that Coimbatore can never even have one five star hotel. Today, it has three, and all of them doing roaring business. Ditto with Chennai. The growth of five-star hotels has never stopped. The State Government is now waking up to invite fresh investment on the Northern side and is planning infrastructure growth there. For example, the private Sri city is growing by leaps and bounds. This SEZ is just across the border and though it is in AP, it does use the Chennai port for all shipping.

The number of new private sector branches, the number of new IT start-ups and so on, is so huge in Chennai. The two cities of Chennai and Coimbatore have become huge medical excellence centers, and have started the medical tourism boom. It is an explosive growth too. In the case of Coimbatore, every single foreign tourist to the most beautiful hill station of Ooty, a mere two hours drive from the city, always stays in Coimbatore as well. The growing number of International Conferences held in both cities also generates revenue. There is now a huge nightlife in Chennai. The event management companies are so active and is growing day after day. The private sector A to Z catering services companies would employ at least two hundred thousand people directly and indirectly. There are some two thousand marriage halls in and around Chennai. One can imagine the size of this economy.

The education boom

Alongside the massive growth in enrollment at the secondary and higher secondary levels, Tamil Nadu has the second largest number of engineering colleges, all affiliated to the world-class Anna University. Of course, at least one hundred of these would shut shop over the next five years. But one can imagine the effect of growth where the education is good. Coimbatore is home to some 70 Engineering colleges, that are well spread out to as many as sixty kilometers. Just imagine the collective economic growth, assuming a teacher strength of 150 on an average and an average salary of at least eighteen thousand. This does not include non-teaching staff. A fact is that all this money is spent only in Coimbatore city. This goes to finance the hundreds of private coaching centers, food in costly hotels, transport and in school education, among other services. The entrepreneurial class, that is very rich, adds to the economic growth, by aiding the growth of new International boarding schools in and around the city.

One has to just understand the dynamics. Hundreds of these engineers join some odd job or the other in the industries within the State. The brightest get selected for IT jobs in Chennai itself. Even if there is a slowdown, the collective development of the educational institutions, has its own spin-off in the economy..

For example, the small town of Tanjore is home to three deemed Universities, one of which is the world famous SASTRA. The other is the Periyar Maniammai University and the third is PRIST. The economic spin-off is once again huge.

The effect of mobility on economic growth

This is one subject that has not been researched very well by most economists. Tamil Nadu has the best-organized bus transport in the country. The huge network of Government and private buses that ply to even the remotest villages has brought about the best of economic miracles. Tamil Nadu is also the most urbanized State of India. The smaller towns are growing by leaps and bounds. Examples are Avinashi and Bhavani near Coimbatore, Kulithalai near Tiruchirapalli, Arcot and Walajah near Vellore, Palayankottai near Tirunelveli, Cheyyar near Kanchipuram and so on.

The question is: how? The answer is a rather complex one, but one that needs deep understanding. Simple economics is that if there are buyers, there will always be sellers. This author was seated in a minibus at 4,30AM, proceeding to Kumbakonam, a bigger town from the smaller temple town called Swamimalai. The minibus would stop at all places and even make irregular stops. The driver and the conductor would chat with the different vendors. What was seen was fish, vegetables, at least seven varieties of spinach, banana, flowers, eggs and what have you. All this is sold in some village or the other, before 6 AM. When quizzed, the vendors replied that this is just one bus. The other buses would take off very soon and the number of vendors who reach each village will be at least ten. The prices will be cheaper here than at Kumbakonam, as the transport cost is less. The buyer is also happy.

My queries at other places indicated trade on a much larger scale. All made possible, only because of organized transport. It should be noted that the profits are quite okay to keep the vendors happy, as they live in their own houses in their villages. The agricultural economy is so active only because of the organized transport in Tamil Nadu. The stuff is also put right on top of the private buses.


Yes, the service sector has contributed to the massive economic growth in recent years, in Tamil Nadu. But it has also brought with it, relative peace. The economic engine will always be strong. It should also be remembered that Tamil Nadu is the most urbanized State of India. This also aids the massive growth of buses and other forms of transport. No wonder, 7% GDP growth is still possible, even with the corruption in the Government.


Author: Neeru Bhatt19 Nov 2018 Member Level: Diamond   Points : 4

A nice article on the progress and growth of Tamil Nadu. The author has mentioned many reasons and conducive environment provided by the state Govt.

One reason which I will like to mention here for such phenomenal progress is the involvement of the people in Govt schemes plus the average overall performance of individuals in this state. In my experience, the Tamil people are in general more laborious and orderly in their working than compared to many other states in our country. They are in general more disciplined, follow the rules, know the office procedures in details and are punctual in their work.

These are the attributes, I feel, which will eventually help a state Govt to progress and show results.

  • Do not include your name, "with regards" etc in the comment. Write detailed comment, relevant to the topic.
  • No HTML formatting and links to other web sites are allowed.
  • This is a strictly moderated site. Absolutely no spam allowed.
  • Name: