Tamil Nadu awaits economic boost from investment

Chennai metro

The southern state of Tamil Nadu, traditionally one of India’s strongest economic performers, had a trying year in 2013. New infrastructure projects and greater government transparency could generate significant economic growth across the state.

A leading region for industry, manufacturing, health care and IT software development, the southern Indian state of Tamil Nadu was only recently surpassed by Gujarat as the most economically liberal state.

This year Tamil Nadu’s economy experienced a growth rate of 4.14 percent, the lowest in the country. The growth rate has not been this low since 2005-2006. Planning Commission member Abhijit Sen explained to Times of India, “Tamil Nadu has been hit harder than other states by the national slowdown.”

Tamil Nadu’s Governor, K. Rosaiah, said the government will increase the expenditure target to jump-start the economy for 2013-2014. He stated they expect growth to reach over 5 percent and that a revival of industrial and agricultural production will benefit service sector growth as well. Rosaiah explained that new policies for an inclusive growth model with an emphasis on equitable development could alleviate poverty and unemployment.

Weather and infrastructure

In February 2013, Tamil Nadu’s Chief Minister, J. Jayalaithaa, declared 31 out of 32 districts in the state were affected by the drought. The drought has hit the Kaveri Delta region especially hard.

Despite the low rainfall, one type of crop, the jackfruit, has done well. Farmers are anticipating a high demand for jackfruit in mid-April or May. S. Ameer Muthar, a farmer in Tirupulani was successful in meeting local demands for organically grown basmati rice despite trouble with irrigation.

Ongoing problems with power cuts have hindered the manufacturing industry. This has also placed restrictions on power companies until a second power line is completed to link the grids in southern India to the northern power grid.

Politicans in Tamil Nadu have used the power outages as a campaign issue and to promise an increase in electrical supply ahead of the anticipated increase demand this summer.

In 2016, the capital city of Chennai will have completed the Chennai metro rail project. This will greatly relieve commuting time and traffic congestion in the city. However, the contractor, Consolidated Construction Consortium Ltd, was recently pulled off the project for failing to complete the eight elevated stations along the Koyambedu-St Thomas Mount line by its scheduled date.

Political landscape

A recent alliance forged by the Bharatiya Janata Party (BJP) with smaller local Tamil parties, DMDK, MDMK and PMK has plunged the state into the national spotlight. This maneuver has left out the two major parties in Tamil Nadu, DMK and AIADMK.

Although J. Jayalalithaa and her party, AIADMK, are not part of the alliance, her close links with BJP’s candidate for prime minister, Narendra Modi, may potentially land her in a high level position if BJP wins big in the upcoming election.

The Congress Party’s local supporter, the DMK, has struggled with infighting. MK Alagiri has been expelled and his younger brother, MK Stalin, named after the Soviet dictator, is now in position to take over leadership of the DMK. “There’s a wave against Jayalalithaa government’s misrule, massive corruption and undemocratic governance,” Stalin said to the Economic Times.

For her part, Jayalalithaa has said that the DMK failed to meet its promises of nationalization and development during its long stint in power with the central government. She promised to create an industrial park in Chennai for the food, printing and engineering industries.

Tamil Nadu has faced a difficult year. If it can improve political transparency and curb corruption, the state could experience growth in 2014. New infrastructure development, international partnerships, and sustained efforts to attract foreign investment will keep Tamil Nadu’s economy in the forefront of India’s global rise.

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Categories: Central Asia, Economics

Author:Christopher Solomon

Christopher completed his internship with the Middle East Institute in Washington, DC and has supported several US government-funded international development programs in the Middle East and Africa throughout his professional career. He primarily writes about the Middle East, Africa, and South Asia. His focus areas include local economics and party politics, at-risk populations, and international security. He is an avid follower of global affairs and is currently a regular contributing writer with Global Risk Insights. Christopher holds a Masters degree in Public and International Affairs from the Graduate School of Public and International Affairs (GSPIA) at the University of Pittsburgh. He studied abroad in Lebanon and worked on a volunteer project in Bolivia. Follow him on Twitter: @Solomon_Chris

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