Tamilnadu Economy

Tamil Nadu’s Unhealthy Growth Pose Threats

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Tamil Nadu’s Unhealthy Growth Pose Threats Tamil Nadu’s Unhealthy Growth Pose Threats Baskar R March 26, 2026 Public Finance, State Economies, Tamilnadu Economy Introduction The fiscal position of Tamil Nadu has been under stress for a decade and more starting from 2015-16, the revenue deficit to GSDP ratio has started exceeding one per cent and fiscal deficit exceeded 3 per cent in 2016-17.  The State economic management post pandemic, not adapting to the prevailing national fiscal management policies were contributing to these deterioration. Having been the traditional leader among major Indian States in per capita own tax revenue being the 6th in position reflects, this.  The State ranks 18th in terms of revenue receipts to GSDP ratio and 10th in own tax-to-GSDP ratio (Shanmugam KR, Tamil Nadu State Govt Finances, April 2025). With this background, attempts have been made here to study some of the key indicators of Tamil Nadu Interim Budget 2026-27.  We have interesting insights on how Tamil Nadu State is faring against its peer states.  Data for Tamil Nadu has been updated based on the interim budget estimates (IBE) and for rest of the States retained as per 2025-26 Budget Estimates (BE). Fiscal Deficit: GFD-GSDP ratio for Tamil Nadu just about stays within the Centre’s prescribed ceiling at 3.48%. This is worse than the Budget estimate by 48 bps.  Revenue Deficit: For 2025-26 (RE) Revenue deficit of Tamil Nadu is at 1.9% of GSDP, 2026-27 budgeted at 1.2% and committed expenditure as % of revenue expenditure is high at 40.9%, at an increasing trend over last three years. Both indicators, highlight Tamil Nadu is faring behind its major peer States used for benchmarking.  Revenue growth is important to fund its growth and the pressures from handling committed expenditure on salaries, pensions and healthcare in an ageing demographic context is a serious problem. Outstanding Liabilities and Interest Payments Outstanding liabilities by State are typically available only as part of the RBI Study and isn’t part of respective State Budgets. The report for 2025-26 helps compare States’ performance uniformly. The key components of outstanding liabilities are State Development Loans, loans from institutions, UDAY, NSSF, loans from Centre, PF, Reserve Fund, deposits and advances, etc. Tamil Nadu is the only State which has crossed Rs.10 lakh crores of outstanding liabilities and has been on increasing trend in recent years. As % of GSDP it is at 29.2% higher than its peer States. Further, RBI Study compares interest payment of States against their revenue receipts to assess how much of State’s own revenue is consumed by debt servicing before any discretionary spending and against revenue expenditure to see how much of it is spent on interest as against services (education, health and salaries) on recurring activities. Comparing interest as % of GSDP would mask underlying revenue capacity constraints.   Expenditure Pattern – Development Expenditure Key Development Expenditure (DEV) pattern and Social Sector Expenditure (SSE) across the major States reflect a mixed pattern.  Uttar Pradesh and Telangana does predominantly well on key indicators under this metric.  Whereas, Tamil Nadu is consistently below peers and needs to revisit the quality of its spending. While Tamil Nadu budgeted Rs 59,562 crore for capital outlay in 2026-27—a 16% increase from previous year. However, the absolute allocation remains constrained relative to fiscal deficit size.   Conclusion This study has reviewed the financial health of Government of Tamil Nadu based on the interim budget of 2026-27. Specifically, it has analysed the overall trends in fiscal deficit, revenue deficit, outstanding liabilities, interest burden, revenue expenditure and their compositions of development and social sector expenditure as % of GSDP. It also compares the capital expenditure pattern of Tamil Nadu with those of the other major State governments in India. A recent report on FISCAL HEALTH INDEX by Niti Aayog (2026) reveals that Tamil Nadu is ranked 13th as compared to Gujarat and Maharashtra ranked at 4th and 5th respectively. As is evident from the data above, Tamil Nadu’s financial performance faces multiple challenges, including rising debt, elevated revenue and fiscal deficit, higher interest burden, committed expenditure increasing to an all-time high of 41% of overall revenue expenditure, etc. This directly leads to lower development and social sector spending. While the State’s economy has grown at a commendable pace on year on year basis, the overall fiscal position has weakened with an increasing reliance on debt to finance revenue expenditures. The State must prioritise fiscal discipline through improved revenue generation, enhanced non tax revenues, and stringent control over debt and interest payments. The Author is a Finance Professional and has keen interest in current affairs and Indian culture. Views expressed by the author are personal and need not reflect or represent the views of the AgaPuram Policy Research Centre.

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A Critical Analysis of Tamil Nadu Economic Survey-2025-26

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A Critical Analysis of Tamil Nadu Economic Survey-2025-26 A Critical Analysis of Tamil Nadu Economic Survey-2025-26 Chandrasekaran Balakrishnan February 19, 2026 Public Finance, Public Policy, Tamilnadu Economy Among the major states in India, Tamil Nadu becomes a last one to release the annual Economic Survey beginning last year, 2024-25. The second edition of Tamil Nadu Economic Survey 2025-26 were prepared by the State Planning Commission, supported by research institutions, the support of subject experts and the finance department of the state government. The Survey provides the nuanced global perspective of the Tamil Nadu economy and its sector wise progress linking with the Indian economy. The Survey highlights the major strengths of social development, rapid industrialisation and economic prowess. However, the quality of social development and physical infrastructure services is not objectively assessed with robust data. Moreover, inter district and intra district regional challenges are still not given adequate attention by policymakers in the state. Nevertheless, the report also rightly identifies the underpinning key systemic challenges faced by the Tamil Nadu economy, including intra-district disparities. Tamil Nadu aims to achieve a one trillion-dollar economy by the year 2030. This year’s economic survey signals that the ambitious vision may be delayed by a year or two. The Survey notes that “If Tamil Nadu sustains its 2024 25 nominal growth rate of 16% and with an assumption of 2% (medium-term rate) rise in the value of dollar against rupee per annum in the medium term, it can achieve the trillion-dollar milestone by 2031. With 3.5% (short term rate of rise of dollar value), it may be delayed for a year.” In terms of nominal prices, Tamil Nadu’s GSDP is estimated at US $370 billion (Rs. 31.19 lakh crore) for 2024-25, reflecting a strong 15.98% annual growth. Whether the state economy is able to sustain this double-digit and high growth rate for the next few years is a big question because the fiscal challenges are mounting quite alarmingly in recent years. In this regard, the state economic survey also notes that “future pressures arising from pay revisions, pensions, and GST rationalisation could strain fiscal space. Sustaining growth will therefore require disciplined and productive use of resources.” The state has one of the lowest rates of multidimensional poverty (1.43% in 2022 23) and is also the second most urbanised state with 54.72% people living in urban areas in 2025 after Kerala’s 80.08%. However, the “urban infrastructure deficits compound housing stress, with pressure on water supply, sewerage, stormwater drainage, solid waste management, transport, and public spaces, and uneven service levels across urban local bodies (ULBs)”. Further, the survey notes that “climate change has further intensified such vulnerabilities disproportionately affecting low-income households. Institutional constraints—limited fiscal autonomy, capacity gaps, fragmented planning, and rising operation and maintenance liabilities—add to these challenges.” The state economic survey has highlighted the following as key challenges faced by the Tamil Nadu Economy, to which the future government warrants more close attention: The “execution challenges related to coordination, land acquisition, regulatory clearances, and capacity building remain binding constraints” in areas like “transport, logistics, energy, water, and urban and rural services. Investments in public transport, electric mobility, metro expansion, and digital integration demonstrate a people-centric mobility vision, while ports, airports, and logistics parks”. There are structural flaws in the area of urban development in Tamil Nadu. Recently, the state government has announced expansions of rural and urban local bodies without adequate attention on how to mobilise resources for building infrastructure facilities for making ease of living for all sections of society. Keeping this in view, the state economic survey rightly notes that “Going forward, the strategy must shift from a project-centric approach to a systems oriented urban transformation framework. Priorities include expanding affordable and rental housing, improving land and housing market efficiency, embedding climate resilience into planning and building norms, strengthening ULB fiscal sustainability, and enhancing metropolitan governance.” “Tamil Nadu is India’s fastest-growing EV manufacturing hub. Global players such as Ola Electric, Ather Energy, BYD, TVS, Vinfast, Ampere, and several battery companies have set up factories in the state.” However, in terms of the total number of EV buses deployed in Tamil Nadu for public transportations is 380 only, which is small as compared to states like Karnataka (1500) and Maharashtra (4000). It is interesting to note that the Survey emphasises “Environmental governance in Tamil Nadu is institutionally advanced but faces increasing strain from industrialisation, urbanisation, and climate risks. Persistent challenges related to water pollution, waste management, and air quality call for technological upgrading, stricter enforcement, and greater community-based transparency. Institutional fragmentation and data silos weaken policy coherence, indicating the need for deeper coordination and integrated data systems.”In each of these areas, the key issue is the efficacy of policies, rules and regulations at the taluk level, district level and regional level, which were very weak across different departments of the state government. As highlighted by the Survey, finding “quality employment for its youth” is a major challenge for the advanced states like Tamil Nadu and also at the national level in India, in reaping the demographic dividend. A larger number of youth are completing higher education without the employable skills and competences as demanded by markets and industry. The survey also notes that “a persistent shortage of affordable housing for Low Income Groups (LIG), informal workers, and migrants remains a major challenge. Escalating land prices, limited availability of serviced land, financing constraints, and regulatory rigidities have widened the demand supply gap, resulting in the continued prevalence of slums and informal settlements.” Though, Tamil Nadu has slightly more Research and Development (R&D) labs of 906 in the industrial units providing training as compared to Maharashtra (858) and Gujarat (821) but in terms of total R&D spending by industries are more in Maharashtra (Rs. 2,243 crore) and Gujarat (Rs.1,814 crore) as compared to Tamil Nadu (Rs 1,143 crore). Tamil Nadu has more public sector factories (163) providing large-scale employment (38,876) as compared to Maharashtra (98 factories, 26,224 employees) and Gujarat (139 factories, 20320 employees), but

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Fiscal Constrains and Structural Transitions

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Fiscal Constrains and Structural Transitions Fiscal Constrains and Structural Transitions Baskar R February 19, 2026 Indian Economy, Tamilnadu Economy State Finances: A Study of Budgets RBI has recently released its annual publication on State Finances: A Study of Budgets of 2025-26 analysing the latest fiscal position of State Governments across India. The report has a separate chapter on India’s demographic transition and its implication for State finances. Key Takeaways for Tamil Nadu Tamil Nadu has been identified as an ageing state – where the demographic share of working age population (15-59 years) begins to decline. This leads to shrinking tax bases and rising committed expenditure in pensions and healthcare.  Compared to peer states, Tamil Nadu operates with the highest committed expenditure burden at 36% of revenue expenditure and high revenue deficit of 1.2%, highlighting structural imbalance between revenue spends and earnings. Read More …

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Highlights of Economic Survey 2025-26 on Tamil Nadu Economy

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Highlights of Economic Survey 2025-26 on Tamil Nadu Economy Highlights of Economic Survey 2025-26 on Tamil Nadu Economy Chandrasekaran Balakrishnan February 6, 2026 Indian Economy, Tamilnadu Economy The national economic survey report has been presented before the announcement of the Union Government Budget for the next financial year since 1957-58. The report outlines the key driving forces of the Indian economy during the past year. The Survey also dives deeply the candors of the key challenges faced in the domestic as well as the international economy. The survey provides a major sector-wise analysis with trends of growth and development, policy gaps, if any, and innovative ways to address sectoral issues at both national and regional levels for achieving national and regional aspirations. With this background, this analysis shows the key best practices highlighted with references to the regional economy like Tamil Nadu state, which is the second largest in size at the regional level. This analysis also looks into some of the grave concerns highlighted in the National Economic Survey on the state’s specific issues. At the national level, it is important to note what the Economic Survey emphasised: “India received credit rating upgrades from three credit rating agencies in 2025, starting with Morningstar DBRS in May, followed by S&P in August and R&I in September. S&P’s upgrade of India from BBB- to BBB was India’s first credit rating upgrade from a major agency in nearly two decades.” This is possible because of India’s macroeconomic performances, which are not only now fundamentally strong now but also the growth accelerated due to a slew of structural reforms and policy measures. Employment, Factories and Higher Productivity The Survey Noted that “in terms of geographic distribution, seven states contributed to around 60 per cent of the total employment in the manufacturing sector with Tamil Nadu (15 per cent) on top followed by Gujarat (13 per cent), Maharashtra (13 per cent), Uttar Pradesh (8 per cent), Karnataka (6 per cent), Haryana (6 per cent) and Telangana (5 per cent). States like Maharashtra, Madhya Pradesh, Tamil Nadu, Himachal Pradesh, Haryana, Uttarakhand, Karnataka and Uttar Pradesh displayed a higher share of larger factories. These states also registered a high productivity in terms of NVA per person engaged. Further, eight industry groups in the organised manufacturing sector contributed to around 60 per cent of the total employment (Chart XII.12).” Growth and Development of Industries It is interesting to note the observations of the Economic Survey on major regional economies, which are essentially “the entrepreneurial state complements this institutional integration by coordinating expectations and bearing risk in sectors where fragmented private actors would otherwise hesitate to act. In automotive components in Tamil Nadu, pharmaceuticals in Gujarat and Hyderabad, and more recently electronics manufacturing clusters in Noida and Sriperumbudur, public policy has not only regulated but convened and aggregated: facilitating cluster formation, underwriting early investment, shaping procurement and export pathways, and making global standards attainable for small and mid-sized firms. In renewables, space, defence manufacturing, and select digital infrastructure, public institutions have signalled technological direction in advance of market consensus.” Further, the Survey noted that “in the area of building and development norms, Haryana, Madhya Pradesh, Odisha, Tamil Nadu, Uttar Pradesh, and Uttarakhand have liberalised building bye-laws, and simplified development norms relating to setbacks, Floor Area Ratio (FAR), parking restrictions, and minimum plot area. These measures have reduced land loss, enabled higher utilisation of urban land, and facilitated project execution, particularly for industrial and commercial developments.” Also, importantly, “for environmental clearances, Andaman & Nicobar Islands, Andhra Pradesh, Goa, Tamil Nadu, and Uttarakhand have enabled self-certification and third-party certification for Consent to Operate, reducing dependence on routine departmental inspections.” Moreover, the Survey observed that for achieving balancing Growth and Green Initiatives…Some evidence shows that states like “Tamil Nadu, Kerala, and Andhra Pradesh have not only enhanced their business environments by integrating sustainability measures but have also, through the Business Reform Action Plan (BRAP), reduced the time taken for environmental clearances.”. Also, the “Tamil Nadu has enhanced the ease of doing business through single-window clearances, digitised approvals, and land reforms, while promoting solar parks, district-level decarbonisation plans, and energy efficiency programs.” The construction sector is an important aspect of industrial growth and development keeping in view that the country is aiming to accomplish viksit Bharat@2047. The Survey mentions that “about 85 per cent of the cement industry is concentrated in the states of Rajasthan, Andhra Pradesh, Telangana, Karnataka, Madhya Pradesh, Gujarat, Tamil Nadu, Maharashtra, Uttar Pradesh, Chhattisgarh and West Bengal. The industry has adequate installed capacity to meet the domestic demand for cement. Domestic cement consumption in India is approximately 290 kg per capita, compared to a global average of 540 kg per capita.” Few States have taken significant policy initiatives in the pharmaceutical sector, with “Scheme for Promotion of Medical Devices Parks: Final approval for financial assistance of Rs.100 crore each has been given to the states of Uttar Pradesh, Tamil Nadu and Madhya Pradesh. Under the scheme, the land has already been allotted to 184 manufacturers.” Under the National Green Hydrogen Mission, “three Green Hydrogen Hubs designated: Deendayal Port Authority, Gujarat; V.O. ChidambaranarPort Authority, Tamil Nadu; and Paradip Port Authority in Odisha.” Moreover, for enhancing Private Participation in the Space Sector,“establishment of a dedicated launch pad and integration facility at Kulasekarapattinam, Tamil Nadu, is underway, which will strengthen India’s launch infrastructure”. Despite the huge potentials in the coastal area developments in the state of Tamil Nadu, the state has not given due importance for a long time, but it has now realised to bridge the gaps and explores with mission mode approach. As per the Economic Survey, “Tamil Nadu’s Coastal Restoration Mission: Tamil Nadu has a 1,069 km coastline, home to 14 coastal districts that are vulnerable to impacts such as shoreline erosion, storm surges, and sea level rise. The Tamil Nadu Sustainably Harnessing Ocean Resources and Blue Economy Project employs a multi-pronged approach to enhance coastal biodiversity, improve coastal protection, enhance livelihoods, mitigate pollution, and enhance project

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Tamil Nadu’s bumpy road to $1-trillion economy

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Tamil Nadu’s bumpy road to $1-trillion economy Tamil Nadu’s bumpy road to $1-trillion economy by Chandrasekaran Balakrishnan October 31, 2025 Public Policy, State Economies, Tamilnadu Economy Though Centre-state devolution gets public attention, little light is shed on intra-state devolution to rural and urban local bodies. If Tamil Nadu is to reach its goal of being a $1-trillion economy soon, the new State Finance Commission will have to address such issues The Tamil Nadu government accepted 259 out of 280 recommendations made by the sixth State Finance Commission without changing the ratio of devolution amount between rural and urban local bodies (Photo | Express) Updated on: 30 Oct 2025, 2:17 am 4 min read Tamil Nadu aspires to become a $1-trillion economy by 2030. However, it seems feasible only after 2031-32 given the amount of work needed on multiple fronts, ranging from effective decentralised governance and sectoral growth challenges to addressing intra-state regional disparities. While the state’s strength of being a global hub for manufacturing and its significant contribution to the services sector make the headlines, certain challenges remain under-discussed. Almost two years have passed since the release of a plan titled ‘Tamil Nadu Vision $1 trillion’, which aimed to “ensure that all districts and regions of the state emerge as growth centres, while driving prosperity for all sections of the society”. Yet, there has been a little visible change in implementing its key recommendations. In a dynamic federal country like India, state governments often tussle with the Centre seeking more regional autonomy. Ironically, some of the same states fare poorly in decentralisation of administrative power and financial autonomy within, despite a mandate for it under the 73rd and 74th constitutional amendments in 1992. The challenges faced by Tamil Nadu, especially its urban and rural local bodies, including its limited capacity to meet the aspirations of the people for better civic infrastructure facilities and services could be mostly attributed to inadequate institutional mechanisms. One of the biggest institutional and structural lacunae is that despite about 55 percent of people living in urban areas, the devolution of funds continues to be higher for rural local bodies (51 percent) as compared to urban local bodies (49 percent). Against this background, the state government has constituted its 7th State Finance Commission (SFC) under the chairmanship of K Allaudin, a retired IAS officer, to “review the financial position of various urban and rural local bodies and make appropriate recommendations on the distribution of funds to be provided by the state government” for a five-year period from April 1, 2027. This surpasses the target to become a $1-trillion economy by two years. The three-member commission has been asked to submit its report by August 31, 2026. Unlike states like Assam and Kerala, Tamil Nadu has not involved any subject experts on its SFC this time too, as has been the case since its inception in 1997. While the first, sixth and the recently-constituted seventh SFCs have been headed by retired IAS officers, others were headed by serving IAS officers. The key recommendations of the SFCs are mandated to be implemented within a year after the submission of action taken reports. However, there are no such publicly available reports on actual implementation until the next SFC is constituted. The state has accepted many of the past SFC proposals, ranging 80-96 percent of the recommendations. However, for the third SFC, the state government accepted only 240 out of the 308—or about 78 percent—of the recommendations. This gives a clue about how bound the state feels about acting on the proposals. The actions are important for the SFCs’ functions, which include a wider consultative process, examination of various data sets of rural and urban local bodies, and time taken to submit the report So it is instructive to look at the time taken by each SFC to make their final submissions. The state’s first SFC took 19 months, second 15 months, third 22 months, fourth 22 months, fifth 24 months, and the sixth took 24 months to submit the final report to the government. Most often, the reasons for delay are not mentioned. It is also important to note that public discourse has been largely silent on the SFCs’ functions, operations, effectiveness, quality, and implementation. With all this in the backdrop, here are five critical challenges before Tamil Nadu’s seventh SFC Decentralisation of real administrative and financial autonomy from the state capital to district administrations, city corporations, and town and village panchayats is still a distant reality. Though the administrative coverage of urban local bodies has expanded to 25 cities from 16, the availability and quality of basic civic infrastructure and services remain inadequate and substandard. 1.Decentralisation of real administrative and financial autonomy from the state capital to district administrations, city corporations, and town and village panchayats is still a distant reality. 2.Though the administrative coverage of urban local bodies has expanded to 25 cities from 16, the availability and quality of basic civic infrastructure and services remain inadequate and substandard. 3. Increased regional disparities within districts have become a major challenge. The average per capita incomes in the western and northern parts of the state are significantly higher than those in the eastern and southern parts. 4.Another major hurdle is the lack of coordination among key departments, insufficient public consultation, and ineffective programme design in crucial sectors such as sanitation, water supply, electricity, roads, transport, policing, waste management, and wastewater disposal. These gaps create avoidable hardships, especially for the young. 5. Although there is significant scope to enhance revenue streams for local bodies in urban or rural administrations, state-level centralisation continues to constrain their autonomy in decision-making and their ability to address local issues and challenges. While neighbouring states Karnataka and Kerala have made significant progress in addressing challenges related to devolution of administrative power, these aspects have often been given piecemeal attention by Tamil Nadu’s SFCs and no commission has taken a holistic view of the structural challenges faced by the local bodies. The prayer is that this time

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The Euphoria of Tamil Nadu GSDP Growth Rate!!

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The Euphoria of Tamil Nadu GSDP Growth Rate!! The Euphoria of Tamil Nadu GSDP Growth Rate!! Chandrasekaran Balakrishnan September 4, 2025 Indian Economy, Public Policy, Tamilnadu Economy 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

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Tamil Nadu Lacks Institutional Mechanisms to Promote Holistic Tourism

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Tamil Nadu Lacks Institutional Mechanisms to Promote Holistic Tourism B Chandrasekaran Tamil Nadu Lacks Institutional Mechanisms to Promote Holistic Tourism B Chandrasekaran Chandrasekaran Balakrishnan June 5, 2025 Cultural Economics, Public Policy, Tamilnadu Economy Tourism plays a crucial role in the economy, contributing 6.23% to the national GDP and providing 8.78% of total employment. For Tamil Nadu, 8% of its GDP comes from the tourism sector and the State aims to increase it to 12% by 2030. In 2019, Tamil Nadu had 49.5 crore domestic tourist arrivals and 0.69 crore foreign tourist arrivals. Between 2013 and 2019, Tamil Nadu was the most visited State by domestic tourists garnering 22.1% of total domestic tourists in India. However, this trend declined significantly in 2020 and 2021 due to the pandemic and continues with the trend. The overall experiences experience of any tourist to the State is a disappointing given the kind of state’s industrialisation and urbanisation achievements. Despite several new steps taken in recent times to promote the tourism sector by the government, the state’s tourism infrastructure continues to be substandard with a lack of integrated mobility; lack of basic civic facilities like water, hygiene and sanitation; lack of adequate safety and security facilities etc. This reflects lapses in holistically developing the sector. In 2003, the Union Ministry of Tourism and Culture released a study titled “20 Years Perspective Tourism Plan for the State of Tamil Nadu” to promote holistic tourism in Tamil Nadu. The study stated that “Tamil Nadu is a magical blend of timeless traditions and colourful festivals – a seat of cultural heritage.” It also stated, “Tamil Nadu, with its picturesque hills, beaches, waterfalls, wildlife sanctuaries, temples, ancient monuments, places of worship for all faiths and centres of art and culture has a lot to offer to the domestic and international tourists”. The following findings were highlighted in the study, which are still relevant as far as the challenges faced by the tourism sector of the State are concerned: Inadequate infrastructure like roads, water, electricity, and transport at some tourist destinations, and increasing pollution arising out of tourism. The bottlenecks at the state level have been identified as lack of accommodation (51%), water supply and sanitation (46%), poor connectivity (43%), power supply (37%), lack of life garbage disposal (30%), lack of travel booking (16%), and insecurity (8.3%). Hence, the average spending by a foreign and domestic tourist is less in Tamil Nadu as compared to some other northern states. There is an absence of heritage hotels, paying guest accommodations, and dormitories at pilgrim destinations. It is estimated that 1.2 international tourist visits provide employment to one person, whereas 17 domestic tourists generate employment for one person. Hence, the employment multiplier is 1.358”. It is estimated that Rs.10.00 lakh invested in tourism created 47.5 jobs against 44.7 in agriculture and 12.6 in manufacturing… In respect of the hotel industry, an investment of Rs.10.00 lakh will give direct employment for 12 persons and five rooms in a five-star hotel at an average gives direct employment to eight persons.”  The study recommended the following measures to develop holistic tourism in Tamil Nadu: Tamil Nadu has a long sea coast (ECR) which can be used to connect places on the East coast and provide added attraction for tourists. Possibilities of inland cruise service on the river/ canals are also suggested to be explored. Tourism plays an important role in the socio-economic development of any country. It is one of the major sources earning foreign exchange. Tourism promotion also generates employment in urban as well as rural areas that may arrest the large scale migration of rural mass to urban centres and in turn help avoid formation of more slums. Tourism can yield positive results provided it satisfies the requirements of sustainable eco-development and is managed scientifically and gainfully. Local people should be made to participate in planning and development of tourism so that they can bring new ideas, support and influence the decisions, and in turn be a part of it. Develop training content and capability to strengthen passenger services at transport interchanges (bus, railway, ferry, ship and air plane terminals); Promote the application of universal design principles to improve the accessibility of tourism sites, especially cultural, heritage and pilgrimage sites. To develop in tandem with allied departments like HR and CE, Transport, Rural Development, Municipal Administration, Water Supply, Department of Art and Culture, NGOs involved in tourism and cultural activities;” Tamil Nadu has just 2 cruises at present, despite having 13% of India’s total coastline. Tourism is highly labour-intensive, but the employment generation has decline in tourism sector in the state recently. Some reasons for the failure are: The statutory powers and other delivery systems to support tourism development (infrastructure development), are vested with various government departments/ agencies which operate in silos with hardly any coordination. Tamil Nadu Tourism Development Corporation (TTDC), incorporated in 1971, has not developed adequate institutional facilities and services for the tourism sector to cater to the demands of inbound domestic and foreign tourists. It has 51 hotels with 852 rooms, which is not adequate. The Institute of Hotel Management, Catering Technology & Applied Nutrition in Chennai and The State Institute of Hotel Management & Catering Technology in Tiruchirappalli are still not adequately equipped with state-of-the-art infrastructure facilities for training skilled manpower for the tourism sector of the state, resulting in failure to produce enough semi-skilled or skilled tourist guides with proficiency in different regions of India and international languages. As the State aims to achieve a one trillion-dollar economy in 2030, tourism presents a significant opportunity for growth. The State’s Tourism Policy 2023 aims to attract new investments of Rs. 20,000 crores and achieve employment generation of 25 lakhs by 2028. It also aims to achieve a tourism sector contribution of 12% of the GSDP share in the state economy. It envisions to develop all the tourism destinations through Tamil Nadu Integrated Tourism Promotion Project (TNITPP). It also announced Focus Tourism Destinations (FTDs) and Focus Tourism Corridors

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Tamil Nadu Budget 2025-26 Aims High But Fall Shorts

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Tamil Nadu Budget 2025-26 Aims High But Fall Shorts Tamil Nadu Budget 2025-26 Aims High But Fall Shorts Chandrasekaran Balakrishnan April 8, 2025 Public Policy, State Economies, Tamilnadu Economy Few State Government Budgets are closely watched at the national and regional level for their key announcements and pragmatic policies on emerging sectors. Tamil Nadu state budget is one such. During the last four years, two finance ministers have presented the state budgets. This year’s state budget is the last full budget as the state assembly elections are due by early next year. We need to appreciate the state government for bringing out the first Economic Survey Report of 2024-25. Tamil Nadu is one of the major industrialised states in the country and has set a target of becoming a one trillion-dollar economy. By not addressing issues related to faster urbanisation, slow paced structural and institutional reforms, lack of decentralisation of governance, rationalisation of overall state’s debts and debts of energy department, the State Budget for 2025-26 may be termed as a missed opportunity. Further, there are several low-hanging fruits to which the state budget did not pay enough attention. Moreover, the state’s window of demographic dividend is already over and faces a shortage of workforce across sectors, which is a major cause of concern. Therefore, the aims to achieve a one trillion-dollar economy dream by 2030 may not be feasible. Indian economy is on the verge of pushing its growth trajectory upwards given the global challenges. Tamil Nadu economy has a major role to play at national level contributions, hence the state budgets should aim and leverage for strengthening the institutional delivery system and decentralised approach of governance. The Budget for the current financial year focuses on social welfare measures which were highlighted most predominately for building popular narratives on distributive political economy. Nevertheless, few pragmatic policies were announced in the Tamil Nadu budget 2025-26 which includes new policies in frontier sectors like Tamil Nadu Semiconductor Mission-2030, Tamil Nadu Maritime Transport Manufacturing Policy 2025, A policy on Animation, Visual Effects, Gaming, Comics and Extended Reality (AVGC-XR), and Integrated Renewable Energy Policy. These are welcome steps. On healthcare, there are measures proposed to prevent and completely eradicate cervical cancer in Tamil Nadu. The Government has planned to provide HPV vaccination to all girls aged 14 years progressively. Further, the state has also proposed to set up “Chennai Science Centre” with the allocation of Rs.100 crore and 2 Basic Sciences and Mathematics Research Centres in Chennai and Coimbatore, in collaboration with renowned research institutes like the Indian Institute of Science (IISc) and Tata Institute of Fundamental Research (TIFR) respectively. Further, the State Budget for 2025-26 also announced a few welcome measures like raising of Municipal Bonds to the extent of Rs.200 crore for the Greater Chennai Corporation, Rs.120 crore for the Coimbatore Corporation, Rs.100 crore for the Trichy Corporation, and Rs.100 crore for the Tiruppur Corporation for increased capital expenditures to bridge gaps in civic facilities. However, the state has been facing multiple challenges on fiscal health indicators, which is a serious concern. As a result, the state faces a number of sectoral challenges, as highlighted by the Economic Survey. Rapid urbanization drives demand for infrastructure services such as transportation, housing, sanitation, and utilities- energy sector, use of technology in service deliveries, etc. However, the budget has given little attention to contemporary issues of lack of public infrastructure for industrial development and urban mobility aspects. Tamil Nadu is the second most urbanized state (54.13% in 2024) after Kerala. The state budget allocated funds for the urban sector are only Rs.34,396 crore under the Municipal Administration and Water Supply Department (Rs.26,678 crore) and Housing and Urban Development Department (Rs.7,718 crore). While, in 2023-24, 54.63% of Tamil Nadu’s urban workforce was employed in the service sector, close to the national average of 58.07%. The state government trained about 41.38 lakh students in the last 4 years, but only 2% of them are employable as per their assessment. Tamil Nadu is ranked 2nd nationally in 2023-24 with 35.56 lakh Udyam-registered Micro, Small, and Medium Enterprises (MSMEs). Of these 10.69 lakh (30%) were in manufacturing MSMEs, while 24.87 lakh (70%) were services-oriented MSMEs. These MSMEs provide employment to 2.56 crore workers in the state. While the budget allocations for industrial development are very meager. A total of Rs.3,915 crore allocated to the Industries, Investment Promotion, and Commerce Department, and a total of Rs.1,918 crore has been allocated to the Micro, Small, and Medium Enterprises Department. Thus, a total of Rs.5833 crore for industrial development. Another important sector is mobility, which is a growth driver for the state. The state has a population of 8.3 crore, but the total number of public transport buses is only 20,260 in 2023-24. Daily passengers travelling in public transport was 1.76 crore in 2023-24 increasing from 1.31 crore in 2019-20. As per the state economic survey, the state government has planned to introduce 8,682 new buses and has placed orders for 8,182 buses with financial support from KfW, the World Bank, SADP, and the state. MTC, a public-sector organisation, will procure 625 more e-buses as a component of the World Bank. However, the State Budget announced that about 1,125 electric buses will be deployed for public use starting this year: 950 electric buses in Chennai, 75 electric buses in Coimbatore, and 100 electric buses in Madurai, A total of Rs.12,964 crore has been allocated to the Transport Department. Also, Rs.20,722 crore has been allocated for Highways and the Minor Ports Department. The number of startups in Tamil Nadu has increased fivefold over the past four years, surpassing the 10,000 marks. But their presence is restricted to a few districts like Chennai, Kanchipuram, Thiruvalluvar, and Coimbatore. The start-ups are not diverse in sectoral focus and also not as dispersed across the districts in the south, east, and central parts of the state. In terms of sectoral fund allocations, only Rs.131 crore has been earmarked for the Information Technology and Digital Services

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Highlights of Tamil Nadu’s First Economic Survey – 2024-25

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Highlights of Tamil Nadu’s First Economic Survey – 2024-25 Highlights of Tamil Nadu’s First Economic Survey – 2024-25 Chandrasekaran Balakrishnan April 1, 2025 Public Policy, State Economies, Tamilnadu Economy The economy consists of several components, including both institutional and individual people. Studying the progress of those components individually and collectively helps the governments, economy, and society to make future policies. The study of sectoral and sub-sectoral progress is an important exercise for the government to plan for its resource allocation and the economy to identify the growth potentials to be harnessed by the people and the private sector. After the Independence, the Union Government introduced the Annual Economic Survey Report along with Budget announcements in the year 1950-51. Given the importance of the economic survey analysis and perspectives on global and domestic policies on sectoral areas, the then Union Government separated the Union Budget and Economic Survey Report in 1964, which is being followed. Since the major economic reforms of 1991, the States embarked on building their growth and development path by bringing out a detailed analysis of sectoral, regional, intra-state district-wise, and block-wise progress of development. Like the Union Economic Survey, many State Governments have also started publishing their own economic survey to present a review of the major developments of the economy and make policy suggestions for the future.  For many years, all the Southern States have been publishing their annual economic surveys while presenting the budgets. The State of Tamil Nadu, the sole exception for years, has joined the bandwagon by publishing its “First State Economic Survey 2024-25” on 13th March, 2025, a day before the Budget Announcement for the financial year 2025-26 on 14th March, 2025. The survey was prepared by the Tamil Nadu State Planning Commission, led by a team of experts. The Government of Tamil Nadu used to bring out the “Economic Appraisal” report published by the Department of Evaluation and Applied Research (DEAR), with time lags. These reports were a kind of review of progress with little attention for public policy perspectives. This analysis focuses on key highlights of the Tamil Nadu’s First Economic Survey 2024-25 in terms of its presentation, and analysis of key issues. The state has set an ambitious goal of achieving a $1 trillion economy by 2030. As a highly industrialized and urbanized economy with strong linkages of global value chains on key sectors, Tamil Nadu’s economy has demonstrated remarkable economic resilience, consistently achieving growth rates of 8% or more since 2021-22. The state is estimated to grow above 8% in 2024-25. Further, the State achieved an average growth rate of 6.37% as compared to the national average of 6.1% during the period from 2012-13 to 2023-24. In the last two years from 2022-23 to 2023-24, this growth trajectory accelerated and the state achieved an average growth rate of 8.18%. The state did not estimate the likely growth rate for the financial year 2025-26 stating the economic situation is “unstable”. In terms of Per Capita Income at current prices, Tamil Nadu has Rs.2.78 lakhs which is 1.6 times more than the national average of Rs.1.69 lakhs in 2022-23 and is 4th largest state in per capita income ranks. While, in real terms, Tamil Nadu ranked 7th among major states in 2022-23, with a per capita income of Rs.1.66 lakh. However, there are huge variations among the districts within the state of Tamil Nadu. The district-wise per capita income highlights major variations among districts in Tamil Nadu. Chengalpattu district has the highest per capita income at Rs 6.48 lakh in 2022-23, followed by Kancheepuram (Rs.6.47 lakh) and Chennai (Rs 5.19 lakh). Notably, in 8 out of the state’s 38 districts, the per capita income exceeds the state average of Rs.2.78 lakh. These top-performing districts surpass the per capita income levels of several major Indian states, including Telangana, Haryana, and Karnataka. At the same time, the districts of Villupuram and Tiruvarur has per capita income of Rs.1.48 lakh each which is lowest in the state. Also, 7 districts (Ramanathapuram, Thiruvarur, Myiladuthurai, Ariyalur, Perambalur, Kallakurichi and Villupuram) have per capita incomes below the national average. Rapid urbanization drives demand for infrastructure services such as transportation, housing, sanitation, and utilities but in each of these areas, Tamil Nadu lags and is unable to provide good quality of facilities and services. Let’s look at the sectoral growth of Tamil Nadu’s Economy as emphasized in the Economic Survey: Tamil Nadu’s agriculture heavily depends on monsoons. The sector contributes Rs.1.5 lakh crore (6% of GSVA) and ranks as the 5th largest sector. It employs 41.1% of the rural workforce. In 2021-22, the state had 92.3 lakh farmers cultivating 64.6 lakh hectares of land. Notably, 93.5% of these farmers (86.3 lakh) are small and marginal, collectively farming 62.7% of the total cultivated area, with an average landholding size of only 0.7 hectares. Tamil Nadu’s 62% of the total cropped area includes major food grains, like paddy, maize, jowar, bajra, ragi, and millets, while non-food crops such as oilseeds, sugarcane, and cotton account for the remaining 38%. Paddy continues to dominate the cropping pattern, with its share in the total cropped area increasing from 32.1% in 2019-20 to 34.4% in 2023-24. The state’s consumption of fertilizers increased by 1.03 lakh MT to 10.68 lakh MT in 2023-24 from 9.65 lakh MT in 2019-20. Power consumption in agriculture also increased by 4146 million units to 17,957 million units and from 13,811 million units during the same period. The state government has allocated Rs.7,216 crore for the subsidy on three phases of free power in 2024-25 which needs to be rationalized by undertaking institutional reforms to eliminate power thefts and losses. The rise in the productivity of key crops in Tamil Nadu has been largely driven by the extensive use of chemical fertilizers and groundwater. The state has a total of 268 cold storage units with a combined capacity of 19,856 metric tonnes which is still inadequate given the expansions. The state’s organic farming has nearly doubled, rising from

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Fiscal Prudence of Southern States

Leave a Comment / Economic Reforms, Indian Economy, Tamilnadu Economy /

Fiscal Prudence of Southern States Fiscal Prudence of Southern States Madhusudhanan S February 19, 2025 Economic Reforms, Indian Economy, Tamilnadu Economy Among the Southern States, Karnataka leads and Tamil Nadu lags in fiscal prudence. Telangana shows strong improvement, while Andhra Pradesh remains almost stagnant. Kerala has improved its fiscal position, but still not healthy. Introduction The NITI Aayog published its report on fiscal status titled “Fiscal Health Index (FHI) 2025,” which was released on January 25, 2025. This report assesses the following five essential sub-indices that are combined to create the Fiscal Health Index: 1. Quality of Expenditure, 2. Revenue Mobilisation, 3. Fiscal Prudence, 4. Debt Index, and 5. Debt Sustainability The fiscal health of 18 major states receives a thorough assessment in the report, which provides insights into the unique challenges and potential improvements in each state. In this article, we will focus exclusively on the fiscal prudence of 5 Southern States. 1. Andhra Pradesh The report states that Andhra Pradesh has always been in fiscal and revenue deficit for the past five years. The Fiscal Deficit to GSDP ratio in 2022–2023 was 4%, falling within the target of 4.5%. The State allocates only about 10% of the total developmental expenditure to capital expenditure. The State amends the Fiscal Responsibility and Budget Management Act (FRBM), from time to time and it is required to achieve specified fiscal targets within the specified periods.  The report suggests that Andhra Pradesh “may focus on enhancing capital expenditure efficiency, optimize committed spending, diversifying revenue sources for greater resilience, and may enforce strict fiscal discipline.” Andhra Pradesh’s rank has come down from 16th position to 17th in 2022-23. It faces high fiscal deficits and lags in the quality of expenditure and revenue mobilisation. The state needs to increase its resource mobilisation and improve its quality of expenditure, while adhering to the FRBM target. 2.Karnataka The report notes that with a revenue surplus of 0.6% in 2022–2023, the State has met its target. Against the 3.5% target set by the FRBM Act, the fiscal deficit was much lower at 2.1%. Further, compared to the previous year (i.e. 2021-22), the Fiscal Deficit to GSDP also declined from 4.1% to 2.1%, due to revenue surplus. While 2022-23 saw a decrease in the quality of expenditure from 54.5% (the 2014-15 to 2018-19 average) to 47.4%, the fiscal prudence score increased from 31.1% to 43.9%. The report suggested that the State may “focus on reallocating expenditure toward education and health. It may need to focus on increasing the revenues of the state.” Karnataka leads the Southern States in fiscal prudence. In 2022-23, the State has slipped from 3rd rank to 10th rank, though it is the best of the southern States, indicating an unfavorable fiscal situation of all the Southern States.  Except for revenue mobilization, Karnataka excelled across all parameters of the Fiscal Health Index. To better its position, Karnataka needs to review its expenditure pattern and increase its revenue mobilisation.  3.Kerala In 2022–2023, the revenue deficit declined to 0.9% of GSDP from 3.3% in 2021–2022. As a result of the decline in the revenue deficit, Kerala’s fiscal deficit also showed a downward trend. In terms of GSDP, the fiscal deficit declined from 5% in 2021–2022 to 2.5% in 2022–2023. The States’ reliance on non-tax revenue is affecting its fiscal stability. While observing that “the fiscal responsibility targets mandated by the Kerala Fiscal Responsibility (Amendment) Act, 2022, aim for the elimination of Revenue Deficits by 2025-26, with specific annual Revenue Surplus goals” the report suggests that the State “may focus on enhancing revenue mobilization through effective tax and Non-Tax strategies, optimizing resource efficiency, increasing Capital Expenditure in the Social Services Sector are increased, and rationalizing expenditures to improve its fiscal health.” Kerala has continuously encountered fiscal challenges for the past nine years. The State is lagging much behind in terms of quality of expenditure and debt sustainability. It is also burdened with substantial interest payments, inefficient capital expenditure and limited resource mobilisation. The State has to improve in terms of quality of expenditure, and find out new sources for resource mobilisation. It should also aim to curtail its debt and interest payments, which are already eating up major sources of income for the state. 4.Tamil Nadu From 2018–19 to 2022–23, the fiscal deficit as a percentage of GSDP increased from 2.9% to 3.4%. Since 2013–14, the revenue deficit has been increasing, with the State’s Own Tax Revenue to GSDP remaining stationary at 6% in the last 5 years. Though the State aimed to eliminate revenue deficit by 2021-22, it decreased only by around 22.2% in 2022-23 over the previous year. The State has set targets to maintain the ratio of total outstanding debt to GSDP at specific levels under the Tamil Nadu Fiscal Responsibility Act, 2003. However, it has exceeded these limits and witnessed an average ratio of 29% over the past 3 years. The report noted that Tamil Nadu “has witnessed significant growth in revenue and capital expenditure, with fiscal deficits and debt levels exceeding the FRBM target.” Tamil Nadu lags in fiscal prudence and needs to reduce its existing liabilities and non-essential spending. The State should strive to keep its fiscal deficit within the limits set by the FRBM Act, without any relaxation. It should also improve the quality of expenditure and need to look for more investments for development. 5.Telangana Although the state’s fiscal deficit target was set at 5% of GSDP, it managed to reduce the deficit to 2.48% in 2022–2023. The State achieved revenue surplus “after three years of deficits and remained compliant with the FRBM targets for both fiscal and revenue deficits in 2022-23.” The report observes that Telangana’s revenue growth is strong and encouraging and suggests that it spends more on increasing Capital Expenditure, especially in the health and education sectors. Telangana has maintained a healthy fiscal positions, due to an effective tax collection system, balanced approach to expenditure and resource mobilisation efforts. It tops in resource mobilisation for all periods.

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