The regional economies in India are still largely evolving and have their own pace of sectoral growth trends. The evolution of the state economy is dependent on the pattern of institutional governance, services, and facilities deliveries, which plays a vital role for achieving the national dream of Viksit Bharath@2047. The degree of economic freedom between and within States varies across India, indicating disparity.

The Gross State Domestic Product (GSDP) is an aggregate of all sectors, broadly consisting of agriculture and allied activities considered as the primary sector; manufacturing, including construction, etc., as the secondary sector; and financial services, transports, hotels, etc., as the services sector. Each sub sector has its own significance for achieving a balanced regional growth as well as intra-regional growth within a State and contributing to the national growth rate.

When politicians or policymakers become passionate about achieving a year’s GSDP growth rate as the biggest achievement, leaving the growth trends and other inferences, it becomes detrimental for economic development, which accounts for a sustained and overall improvement in welfare. Further, at the regional level, some of the sub-sectors’ growth trends are undermined while focusing only on the overall GSDP growth rates, which leads to not only misinterpretations but wrong conclusions for short term political gains.

It is pertinent to note that Ludwig Von Mises, a prominent figure in the Austrian School of Economic Thought, saw statistics as descriptive rather than explanatory, and he cautioned against interpreting statistical regularities for political milage. He argued that statistics deal with past events and historical facts, lacking the ability to predict future outcomes or reveal causal relationships in the realm of human action.

In April, 2025 when the Union Ministry of Statistics and Programme Implementation (MoSPI) had released the state-wise GSDP data, there was a huge celebration among a section with the claim that the one-year growth rate of Tamil Nadu state (9.69% for 2024-25) was an extraordinary achievement. The truth is that one year growth rate data cannot give a true picture for a trend analysis- short run, medium run, and long run. The macroeconomic growth rate discourse in the State missed an important point that Tamil Nadu’s agriculture and allied sector witnessed in negative growth of -0.15% in 2024-25 (provisional).

As per the provisional data, the average GSDP Growth rate of Tamil Nadu in the last four years (2021-22 to 2024-25) was 8.48%, which was way below the growth rates of States like Odisha (9.80%) and Maharashtra (8.99), and Karnataka (8.73%). Moreover, more than a dozen States’ provisional GSDP data were not even released for the year 2024-25 in April, 2025.

Similarly, the MoSPI released the revised State-wise GSDP data on 1st August, 2025, for the financial year 2024-25. One-year GDP data is important, but it is the trend which is more important. There is another dubious claim of a 14-year break of the Tamil Nadu State GSDP! Let’s look at what the actual average trend data reveals.

In the current regime of DMK rule in Tamil Nadu, the average growth rate of State GSDP for last four years (2021-22 to 2024-25) is 8.63% which is lower than states like Assam (9.05%), Bihar (9.59%), Karnataka (8.73%), Maharashtra (8.99%), Meghalaya (9.54%), and Uttara Pradesh (9.15%).

It is also interesting to look at the data of the first four years’ average state GSDP growth rate of the previous DMK regime. Tamil Nadu’s economy performed far better than comparatively. The average state GDP growth rate for the first four years was 9.41% (2006-7 to 2009-10). Further, even then, States like Bihar (10.41%), Chhattisgarh (9.76%), Haryana (9.89%), etc. outperformed Tamil Nadu.

It is pertinent to note that Tamil Nadu’s share of GDP at all India level over the last 7 decades increased only by 0.2% from 8.7 % in 1960-61 to 8.9% 2023-24. Maharashtra’s economic performance has remained relatively steady throughout the period (from 12.5% to 13.3%).

According to recent NCAER Analysis (2025), the state of public finance of Tamil Nadu is worrisome. Debt Sustainability Analysis, a method used to assess whether a state (or country) can meet its debt obligations without resorting to excessive borrowing or facing financial instability, expects an upward and increasing trajectory, during the period from 2022-23 to 2026-27.

In recent years, what Tamil Nadu missed is the following key drivers of economic growth and creation of employments opportunities, which is at par with States of Karnataka and Maharashtra.

• Attracting FDI: Analysis of major states’ attractions of Foreign Direct Investments (FDI) Trends of the last decade (2015-16 to 2024–25) shows Gujarat’s share increased from 6% to 11%, while Tamil Nadu’s share declined from 11% to 7%. Tamil Nadu is still lacking what Karnataka and Maharashtra have nurtured for decades, including improved infrastructure policy stability and mature industrial ecosystems across the departments and across the region/districts within the State. The latest FDI data analysis for 2024-25 reveals that among the top ten states, Maharashtra accounts for 39%, followed by Karnataka (13%) and Delhi (12%). Tamil Nadu ranks 5th with FDI inflow of Rs. 31,103 crores.
• Under-utilised Coastal economy: The strategic geo-economic coastal advantage of Tamil Nadu has not yet been harnessed.
• Mobility: In the area of mobility as a key driver of the economy, Tamil Nadu has done some concrete efforts in terms of policy for the attraction of new investments for the production of Electric Vehicles, but it has been lacking consistently over the years in terms of adoption of EVs in public transportations across the state.
• Sub-par urban civic amenities: Urban Population in Tamil Nadu has consistently exceeded the national estimates, and the gap between the two has widened, particularly over the past three decades. Now, Tamil Nadu has 54% of its urban population, but basic urban civic facilities are very poor across the state, without decentralisation
• Diversification: Tamil Nadu predominantly concentrates on some services sectors, agriculture, forestry, and fishing, construction, and manufacturing sectors. Manufacturing constitutes 16.8% of the total share of workers in 2022-23.

The future economic trajectory of Tamil Nadu is a matter of governance at both State and local levels. It encompasses policies at State level, like for example, improved ease of doing business for international business firms, but also at local-level for local MSMEs. Instead of being fixated on a year’s economic growth, the policymakers need to analyse the trend over a decade to find ways to have a sustained development.

B.Chandrasekaran is an Senior Economist and Founder Chairman of the AgaPuram Policy Research Centre, Erode.

Views expressed by the author are personal and need not reflect or represent the views of the AgaPuram Policy Research Centre.