The new Chief Minister meeting leading industrialists and heads of industry bodies augured well for promoting the state as a top investment destination and strengthening its position. Vijay has assured them of his support for expansion and investment plans.
Before liberalisation in 1991, Tamil Nadu suffered a lot on the industrial front owing to the Centre’s (Congress government) policy of promoting investment in backward areas that largely benefited northern and central regions. Even the public sector undertakings could not expand in the state.
Post that era, due to its inherent strengths, infrastructure, political stability, industrial culture, peace and skilled labour, Tamil Nadu emerged as the most favoured and top investment destination for domestic and foreign investors. It emerged as a dominant player in diverse industries like automotive and components, tyres, textile machinery, textiles, garments, knitwear, cement, fertiliser, sugar, engineering goods, chemicals, mobile phones and consumer electronics components.
In recent years, investments have flowed into sectors like infrastructure, manufacturing, engineering, automobile, infotech, green energy, electric vehicles, data centres, financial services, electronic hardware, realty, housing and retail. The state is also a top merchandise exporter.
Mix bag of business
Tamil Nadu has a vibrant industrial sector, with 35 Fortune 500 companies. Almost all countries have their envoy offices. The state leads the country in family-owned businesses with over 12 groups in different sectors.
The investment climate is vitiated by the stigma attached to the state for rampant drug trafficking, liquor addiction and sexual abuse of women. This has affected industrial peace and productivity and led to shortage of skilled labour including migrant labour. The situation is expected to improve with the first order signed by Vijay for the formation of a special anti-drug trafficking force to tackle narcotics networks and drug-related crimes. This, along with the creation of a dedicated special task force aimed at strengthening women’s safety and addressing crimes against women is expected to vastly improve the investment climate.
On the labour front, there are no major disputes. Still, the state has a deeply rooted trade union movement. The two leftist unions and DMK’s Labour Progressive Federation (LPF) are strong in utility services like transport and electricity. TVK is yet to have its own trade union. But it has ministers from Congress, VCK and IUML and outside support from two leftist parties. So, it has a big task of ensuring industrial peace with the support of coalition partners.
Ease of doing business
Tamil Nadu has been soaring high on the ease of doing business parameters and the new government has to sustain this advantage. It has to reckon with the aggressive investment promotion efforts of Andhra Pradesh, Telangana and Karnataka. The industry and new investors are concerned over the high hidden transaction cost, rampant corruption in official corridors, interference by middlemen and big wigs in the ruling party. They may heave a sigh of relief by Vijay’s declaration to end the practice and provide a transparent administration and good governance.
The TVK Government may leverage the centre’s Make in India policy, production linked incentive (PLI) schemes and the focus in the FY27 budget on biopharma, semiconductors, electronics, rare earth minerals, chemicals, capital goods and textiles and footwear. The state can also work closely with the centre on budget proposals like establishing rare earth corridors to support the mineral-rich states of Odisha, Kerala, Andhra Pradesh and Tamil Nadu to promote mining, processing, research and manufacturing. Mega Textile Parks can be set up to promote value addition to technical textiles and reviving 200 legacy industrial clusters to improve their cost competitiveness and efficiency through infrastructure and technology upgradation.
China plus strategy
India is being promoted as an alternative investment destination to move away from China. Companies from Japan, the US, South Korea and China are keen on relocating their businesses. The centre has identified a huge land pool in Tamil Nadu, Andhra Pradesh, Gujarat and Maharashtra. Tamil Nadu with its strong manufacturing base can closely track and attract new investments that are likely to exit China and other countries.
Strengthening competitive advantage
Like the boom in the auto sector, Chennai witnessed a boom in IT and ITES. World Bank, Shell, Ford, Standard Chartered Bank and scores of foreign and Indian players have expanded their operations in the sphere. The state has also attracted big investments in data centres, GCC centres and AI & ML. Chennai also has a large number of global R & D, design and product development centres. The new government can leverage this advantage and promote the state as a top destination.
The languishing state-owned undertakings can be restructured or merged. As the Centre has done, the boards of PSEs can have well known private sector top executives and professionals for fine tuning their performance. Like the Centre’s PSEB, TN can have a selection board headed by eminent industrialists. The state can also study the scope for monetising state-owned vacant land parcels.
Policy and execution innovation
Tamil Nadu is among the select states benefiting significantly from CSR spending, with annual contributions exceeding Rs 35,000 crore. The state government can leverage this advantage by inviting leading companies to partner in socially relevant initiatives such as Amma canteens, public health centres near industrial estates, modernisation of government schools, creation of sports infrastructure. At the same time, the Tamil Nadu Planning Commission can be restructured into a dedicated Tamil Nadu Economic Think Tank under the leadership of the Chief Minister, with experts from multiple domains. This body can release policy papers, evaluate welfare and development schemes and help shape informed public policy.
(The author is a senior financial journalist)