Economic Rise of Tamil Nadu

Apurva Kumar wrote a series on Tamil Nadu’s economic growth. It is informative in bits and pieces. I’ll try and collate them here.

 

First, TN has, over decades, moved a good number of people away from agriculture to higher income (and growth) sectors like industry, construction and services. Even within agriculture, there is greater diversity than most other states (e.g. diary, poultry and egg processing apart from regular crops).

 

Second, industrialization has been cluster-based, i.e:

“A group of enterprises located within an identifiable and as far as practicable, contiguous area.”

Examples include Tirupur (cotton knitware) and Coimbatore (spinning mills and engineering goods). Such cluster-based setups work best if infrastructure to link these enterprises is in good shape. Even among the more industrialized states, TN has done better on such infrastructure projects. Such clusters also provide an alternative to farm workers – they can move to industrial jobs without having to go too far from home.

 

In the second article, Kumar says TN “loosened the caste shackles” long back which “broke down the relationship between caste and business, thus bringing lower castes into entrepreneurship”. Why haven’t states like UP and Bihar had such transformations? He cites Ashutosh Varshney’s view that the ordering of events is the reason (social mobilization first? Or electoral mobilization first?)

 

In TN, the lower castes didn’t just battle for reservations; they sought (and got) education and commercial activities. They did not rely on the government to do all the upliftment. Or as Varshney puts it:

“Lower caste politics in Southern India moved from movement politics to electoral politics, in the North, lower caste politics has been almost entirely electoral. The Dalits of UP have no significant commercial or educational organizations.”

 

In the last article, Kumar compares TN with UP. To me, it was a surprise that the per capita state GDP of the two was nearly the same in 1990. It is only since liberalization that TN has pulled significantly ahead. A large part of that divergence is because UP has stayed a largely agricultural state. The sector which makes the biggest difference between the two states is manufacturing, not service. In addition, TN is a leader in banking and insurance. Unsurprisingly, these sectors are highly correlated to economic growth.

 

An informative whirlwind tour of the reasons behind TN’s economic rise.

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