Economy & Industries in Tamilnadu

Macro-economic trend

Tamil Nadu's gross state domestic product for 2007 is estimated at 275,000 crores (70 billion USD) in current prices. The state experienced a GDP growth rate of 12.1% for this period. Possessing the third largest economy (2007-2008) among states in India, Tamil Nadu is also the most industrialised state in India. The per capita income for the period 2007 - 2008 for the state was Rs.43,000 ranking second among the South Indian states. It ranks third in foreign direct investment approvals (cumulative 1991-2002) of Rs.225,826 million ($5,000 million), next only to Maharashtra (Rs.366,024 million ($8,100 million)) and Delhi (Rs.303,038 million ($6,700 million)) and the State's FDI investment constitutes 9.12% of the total FDI in the country. Tamil Nadu was the winner of fDimagazine's Asian Region of the Future award 2005/06 in terms of FDIs, surpassing Australia's New South Wales. Unlike many other states, the economic resources are quite spread out, rather than concentrated in a small industrialised area.

The overall unemployment is relatively low with 2.8% rural and 4.8% urban from CSI. The graph at right shows how the Per capita income of Tamil Nadu has grown steadily keeping above the national average.

Share of India
1994 - 95
↑ 19.32%
↑ 7.49%
1996 - 97
↑ 29.96%
↓ 7.18%
1998 - 99
↑ 32.47%
↑ 7.40%
2000 - 01
↑ 19.36%
↓ 7.33%
2002 - 03
↑ 09.92%
↓ 6.85%
2004 - 05
↑ 21.81%
↓ 6.61%

According to the 2001 Census, Tamil Nadu has the highest level of urbanisation (43.86%) in India, accounting for 6% of India’s total population and 9.6% of the urban population. and is the most urbanized state in India. Services contributes to 45% of the economic activity in the state, followed by manufacturing at 34% and agriculture at 21%. Government is the major investor in the state with 51% of total investments, followed by private Indian investors at 29.9% and foreign private investors at 14.9%. Tamil Nadu has a network of about 110 industrial parks and estates offering developed plots with supporting infrastructure. Also, the state government is promoting other industrial parks like Rubber Park, Apparel Parks, Floriculture Park, TICEL Park for Biotechnology,] Siruseri IT Park, and Agro Export Zones among others.

Annual Plan outlays have increased by a record 75% from Rs.52,000 million ($1,100 million) in 2001-2 to Rs.91,000 million ($2,000 million) in 2005-6. Based on URP - Consumption for the period 2004 - 2005, percentage of the state's population Below Poverty Line was 27.5%.


Tamil Nadu is a highly industrialised state. Many heavy engineering and manufacturing-based companies are centred in and around the suburbs of Chennai (nicknamed, "The Detroit of Asia"). Chennai has been able to get a large number of investments due to a combination of infrastructure (ports, road, power), investment climate, low cost and good availability of man power. Chennai boasts the presence of global vehicle manufacturing giants like Ford, Renault-Nissan, Caterpillar, Hyundai, Michelin, Komatsu, BMW, and Mitsubishi as well as domestic heavyweights like MRF, TI Cycles, Ashok Leyland, Royal Enfield, Mahindra & Mahindra(JV with Renault-Nissan to produce Logan brand of cars), TAFE Tractors, and TVS.It also has a railway coach factory,ICF(Integral Coach Factory).Recently in an equal joint venture agreement, Renault and Nissan have decided to invest Rs. 4,500 crore ($1,140 million) to set up an integrated greenfield automotive facility at Oragadam near Chennai. A memorandum of understanding (MoU) in this regard was signed with the Government of Tamil Nadu in February 2008.

Hyundai's manufacturing plant at Irungattukottai near Sriperumbudur.

The project will come up on 678 acres (2.74 km2) and will provide vehicle production platforms for the two car-makers. It will also have powertrain facility. The plant will have an installed capacity of four lakh vehicles annually. The facility is expected to go on stream in 2010.Recently an MoU has been signed between Daimler-Hero Motors for establishing a truck manufacturing plant in Oragadam with an investment of Rs 4,400 crores ($1,100 million). This project would give a fillip to the manufacturing sector in Tamil Nadu, especially in the area of automobiles and auto components and help consolidate Chennai's position as the leading location for automobile production and related industries in India. This is due to the aggressive marketing by the officials of the state. Everything from automobiles, railway coaches, battle-tanks, tractors, motorcycles and heavy vehicles are manufactured in the state. Sterlite Industries have their copper smelter (in Tuticorin) and aluminium (in Mettur) factories here. A large number of textile mills and engineering industries are present around the city of Coimbatore.Coimbatore is also headquarters for Pricol, LMW,ELGI,Roots industries,Shanti gears and Suguna poultry.Also Coimbatore is known for its motor pump industries like Texmo, Deccan pumps and CRI pumps. Coimbatore is called the 'Manchester of South India'.

Karur is well known for its beautiful world class bus body building industries where most of the buses used in south India are manufactured, and truck bodies are built in Tiruchengode and Namakkal near by Salem.

Over 11.2% of the S&P CNX 500 conglomerates have corporate offices in Tamil Nadu. The Kalpakkam Nuclear Power Plant, Ennore Thermal Plant, Neyveli Lignite Power Plant, many hydroelectric plants including Mettur and the Narimanam Natural Gas Plants are major sources of Tamil Nadu's electricity. It is presently adding the Koodankulam Nuclear Power Plant to its energy grid. Tamil Nadu sources a significant proportion of its power needs from renewable sources with wind power installed capacity at over 3600 MW or over 40% of the maximum peak demand. As of 2005, Tamil Nadu is one of the few Indian states with surplus power electricity, enabling the electrical authority to sell it to neighbouring states of Andra Pradesh & Karnataka. Tamil Nadu ranks first nationwide in diesel-based thermal electricity generation with national market share of over 34%.

The textile industry plays a significant role in the Indian economy by providing direct employment to an estimated 35 million people, and thereby contributing 4% of GDP and 35% of Gross Export Earnings. The textile sector contributes to 14% of the manufacturing sector. There are a lot of Textile mills located in Coimbatore. The city of Tirupur, in Tamil Nadu is the country's largest exporter of knit wears. knitwear and sometimes karur to tiruppur area referred to as Textile valley of India. In 2004, the export turnover from the town was more than Rs. 50,000 million ($1,000 million). Some 7,000 garment units in the town provides employment opportunity to 7,50,000 people. 56% of India's total knitwear exports come from Tirupur. The Export Import Policy of 2002-2007 acknowledges Tirupur for its contribution to the export efforts.

The home textile capital of India - city of Karur generates around (35,500 million) $750 million a year in foreign exchange and give the opportunity to 3,50,000 peoples for work.Over 60% of total India's exports come from karur. The Karur exports of Home-Textile products such as bed linens, kitchen linens, toilet linens, table linens and wall hangings.

Erode is also the major inland textile hub of India especially for woven garments & sarees. Madurai and Kanchipuram are famous for their handloom and silk saris.

Wind turbines at Muppandal in Nagercoil Kanyakumari District. In the background are hills of the Western Ghats.

Electronics manufacturing is a growing industry in Tamil Nadu. Companies like Nokia, Flextronics, Motorola, Sony-Ericsson, Foxconn, Samsung, Cisco, Moser Baer and Dell have chosen Chennai as their South Asian manufacturing hub. Products manufactured include circuit boards and cellular phone handsets. Ericsson also has a Research and Development facility in Chennai. Big EPC companies have set up their Engineering centres which include Saipem I Project Services ltd, Technip, Foster Wheeler, Mott Mecdonald, Petrofac and Technimont. The Austrian company Austrian Energy and Environment also have a design office here besides local giant ECC {Larsen & Toubro}. Sanmina-SCI is the latest company to invest in Tamil Nadu to create a state of the art manufacturing facility. Nokia Siemens Networks has decided to build a manufacturing plant for wireless network equipment in Tamil Nadu. Moser Baer has decided on setting up a facility to manufacture silicon-based photovoltaic thin film modules and allied products with an investment of $500 million.

Bharat Heavy Electricals Limited, a global electrical equipment manufacturing public sector company, has manufacturing plants at Tiruchirapalli and Ranipet. The construction industry also saw new entrants like BGR Energy systems ltd, Consolidated construction consortium.

The state government owns the Tamil Nadu Newsprint and Papers (TNPL), the world's biggest bagasse based Paper mills in Karur . as well as the world's sixth largest manufacturer of watches together with TATA at hosur, under the brand name of "Titan". 55% of all wind-generated electricity in India is created by windmills in Tamil Nadu. Renowned Danish wind power company NEG Micon has established its manufacturing unit in Chennai.

Tamil Nadu is a leading producer of Cement in India. It is the home of leading cement brands in the country such as Chettinad Cements (in Karur), Dalmia Cements (in Ariyalur), Ramco cements (Madras Cement Ltd), India cements (in Sankari, Ariyalur), Grasim etc. Big companies like MICO and Cognizant solutions have set up their design offices here. L&T is setting up big manufacturing units with an investment of 500 crores. Even temple city Madurai has attracted Honeywell to set up their centre here.

The town of Sivakasi is a leader in the areas of printing, fireworks, and safety matches. It was fondly called as Kutty Japan or "little Japan" by Jawaharlal Nehru. It contributes to 80% of India's production of safety matches as well as 90% of India's total fireworks production. Sivakasi provides over 60% of India's total offset printing solutions and ranks as one of the highest taxpaying towns in India. Sivakasi also is a 100% employed town, putting it in the company of very few towns in India.

Tamil Nadu has a significant amount of mineral reserves such as lignite (87%), vermiculite (66%), garnet (42%), zircon (38%), graphite (33%), ilmenite (28%), rutile (27%), monazite (25%), and magnesite (17%). The numbers in the brackets indicate the percentage contribution to the national share. India's leading steel producer, SAIL has a steel plant in Salem. Tidel Park in Chennai is one of the largest software parks in India.

Tamil Nadu is a leading contributor in the IT and BPO sectors. Tamil Nadu is the third largest software exporter by value in India, second only to Karnataka and Maharashtra. India's largest IT park is in Chennai. Software exports from Tamil Nadu more than doubled from Rs. 76 billion ($1.6 billion) in 2003-04 to Rs. 141.15 billion {$3.53 billion} in 2005-06 and zoomed to Rs. 207 billion {$5 billion} by 2006-07 according to NASSCOM. Chennai is a hub for e-publishing with 47 e-publishing units registered with the STPI in Chennai. Companies such as Symantec, Fidelity National Information Services, eBay, Hewlett-Packard, Computer Sciences Corporation, Virtusa, HCL, Wipro, TCS, Temenos, Satyam, Infosys, Polaris Software Lab, Cognizant Technology Solutions, Acme Technology Pvt Ltd, Covansys, Capgemini, Ford Information Technology, Xansa,Changepond, Verizon, iSoft,insoft, iNautix, MphasiS(Electronic Data Systems), Bally and many others have offices in Chennai.

Tidel Park in Chennai is one of the largest software parks in India.

Infosys Technologies has set up India's largest software development centre to house 25,000 software professionals at an estimated investment of Rs. 12,500 million ($270 million) in Chennai. Chennai is also the preferred destination for companies outsourcing their high-end knowledge intensive operations. Testimony to this is the presence of major market research companies such as Frost & Sullivan and equity research companies such as Irevna in Chennai. This is the next high growth area that Chennai is witnessing.

Agriculture and Irrigation

Tamil Nadu has historically been one of the agricultural states;its advances in other fields launched the state into competition with other states. Even so, Tamil Nadu is a leading producer of agricultural products in India. At present, Tamil Nadu is India's fourth biggest producer of Rice, next to West Bengal, Andhra Pradesh, Punjab and Uttar Pradesh. The Cauvery delta region of the composite Thanjavur district is known as the Rice Bowl of South India. Next to Thanjavur, is the Tirunelveli which is the second largest producer of Rice due to the undrainable river Thamirabarani. Tamil Nadu accounts for nearly 6% of the area under fruits and 4% of the area under vegetables in the country. In terms of production, the State’s share is nearly 10% in fruits and 6% in vegetables. Tamil Nadu is also a leading state in the production of flowers. The total production of horticultural crops is 99.47 Lakhs during 2003-04. The main flowers grown in Tamil Nadu are Jasmine, Mullai, Chrysanthemum, Marigold and Rose.

Paddy fields in Theni District across the backdrop of the Western Ghats.

Mango and Banana are the leading fruit crops in Tamil Nadu accounting for over 84% of the area under fruit and over 87% of the total fruit production. Off-season production of mango and round-the-year production of grapes is unique to Tamil Nadu. The main vegetables grown are tapioca, tomato, onion, brinjal and drumstick. Vegetable plantation in Nilgiris district.

The state is the largest producer of bananas, flowers, tapioca, the second largest producer of mango, coffee, natural rubber, coconut, groundnut and the third largest producer of sapota, Tea and Sugarcane. Tamil Nadu is also a leading producer of spices, kambu, corn, rye and oil seeds. The main spices grown are chillies, coriander, tamarind, turmeric and curry leaves. Tamil Nadu's sugarcane yield per hectare is the highest in India. A host of sugar companies have their operations here including EID Parry I Ltd., Thiru Arooran Sugars Ltd., Sakthi Sugars Ltd., Bannari Amman Sugars Ltd. and Rajshree sugars Ltd. The state has 17,000 hectares of land under oil palm cultivation, the second highest in India. Currently, Tamil Nadu is the only state to have a formal bio-diesel policy using jatropha plant crops and to distribute wasteland to the poor farmers for planting.

Tamil Nadu is the home to Dr M.S. Swaminathan, known as the "father of the Green Revolution" in India. Tamil Nadu Agricultural University with its seven colleges and thirty two research stations spread over the entire state contributes to evolving new crop varieties and technologies and disseminating through various extension agencies. The net sown area is 36% of the total geographic area (National average of 46%). The gross cropped area is 53,200 km² with a cropping intensity of 119. Irrigation covers 46% of the cropped area and the remaining 54% is rain-fed. Tamil Nadu's agriculture is heavily dependent on river water and monsoon rains.

Vegetable plantation in Nilgiris district.

The perennial rivers are Palar, Cheyyar River, Ponnaiyar, Kaveri, Meyar, Bhavani, Amaravati, Vaigai, Chittar River & Tamaraparani. Non-perennial rivers include the Vellar, Noyal, Suruli, Gundar, Vaipar, Valparai and Varshali. Canals, tanks and wells form the sources of Irrigation for farmers in the state. As of 2005-2006, the state had 2395 canals with a length of 9,747 km, 40,319 tanks, 670 ordinary government wells, 1,620,705 ordinary private wells and 290,611 tube wells.

Mathur Aqueduct is one of the largest in Asia and irrigates portions of Kanyakumari district

Irrigated Agriculture Modernization and Water-bodies Restoration and Management (IAMWARM) project is a World Bank aided project being implemented in Tamil Nadu at a cost of INR 2500 crores. Duration of the project April 1 2007 to March 31 2013. The main aim of the project is to restore the existing 40319 tanks to save water to their full capacity as it was created by ancient forefathers of tamilnadu some 2000 years before.