An economic trajectory marked by resilience and challenges Premium

The State’s economic transition is rooted in a balanced expansion of both its manufacturing and service sectors. Of note, is its manufacturing sector.

In the last three years, the Nobel Prize in Economics has been awarded to scholars who have shown that institutions, including social institutions, matter for economic development. This thesis is not novel, but its recognition is particularly relevant to India, where differentiation and discrimination based on caste and gender continue to persist in the economic domain. This is true of Tamil Nadu as well, though to a lesser extent. The State has demonstrated how social inclusion and economic development can be a mutually reinforcing process.  

Tamil Nadu has done well on both the economic and social development fronts. With 6% of the country’s population, Tamil Nadu contributed 9.21% to the national Gross Domestic Product (GDP) in 2023-24. According to Reserve Bank of India (RBI) data on Indian States, in 2024-25, the State had the second-highest per capita Net State Domestic Product (NSDP) in constant prices (2011-12 prices) among major States.Tamil Nadu’s real economic growth rate of 11.19% for 2024-25 marks the highest for any State in the country, besides being the highest for the State in the past 10 years. This economic dynamism, unlike that of other dynamic States like Gujarat or Maharashtra, is equally backed by consistent improvements in human development.  

The State has the second-lowest headcount measure of poverty as well as the second-lowest multidimensional poverty index. The State also ranks third in the Sustainable Development Goals (SDG) Index. Tamil Nadu has the second-highest gross enrolment ratio in higher secondary education and the highest in tertiary education. It was ranked the best in the Social Progress Index (SPI) developed by the Institute for Competitiveness and Social Progress Imperative. This unique development trajectory has been sustained through simultaneous and spatially distributed investments in hard infrastructure like power and transport, as well as in health and education. Tracing the key economic achievements of the State since the pandemic, this essay goes on to highlight the challenges that the State has to confront to sustain its path of inclusive economic growth. 

Balanced economic transformation 

The State’s economic transition is rooted in a balanced expansion of both its manufacturing and service sectors. Of note, however, is its manufacturing sector. During a period when manufacturing has not found its feet at the all-India level despite several measures, the State has emerged as a model of sustained manufacturing dynamism. It has been a major producer and exporter of automobiles and auto components, garments, textiles, and leather goods since the 2000s, and continues to be so. While its competitiveness in these sectors has a longer history, its success in electronics production and exports is recent. It accounted for more than 41% of India’s electronics exports in 2024-25, and is poised to take advantage of the ‘China-plus-one’ strategy of global electronics majors. Home to seven of Apple’s 14 assembly and component firms in India, the State has announced a separate policy for electronic component production, seeking to embed the investments in the State’s ecosystem, and thereby strengthen local linkages.