Tamil Nadu Economy

Tamil Nadu is a state that has ensured a simultaneous improvement in growth and human development. Innovative welfare interventions combined with economic dynamism have been a key feature of the state’s development. In the context of the Dravida Munnetra Kazhagam coming to power on the back of a slew of promises on welfare and development, and the ongoing pandemic, the trajectory of growth and resource mobilisation efforts by the state is examined. The analysis points to an emerging disjuncture between growth and tax efforts of the state as well as a decline in central transfers.

J Dennis Rajakumar (dennisraja@epwrf.in) is Director, EPWRF, Mumbai. M Vijayabaskar (vijaybas@gmail.com) teaches at the Madras Institute of Development Studies, Chennai.

The Dravida Munnetra Kazhagam (DMK) has come to power after a gap of 10 years, promising to make Tamil Nadu the most developed in the country. Though the state is known for combining economic growth with human development better than most states (Kalaiyarasan and Vijayabaskar 2021), the DMK’s electoral campaign dwelt at length on several failures of the decade-long All-India Anna Dravida Munnetra Kazhagam (AIADMK) government in sustaining development and in protecting its autonomy. True to the state’s long history of welfarism-driven development, the DMK’s manifesto promises a number of interventions in this regard. In fact, one of the first government orders issued after the DMK assumed power was to release funds for payment of `4,000 per ration cardholder as payment to compensate for livelihoods lost due to first wave of the pandemic.

The welfare interventions that the state is known for, critically depends on sustaining its economic dynamism and consequent revenues. The manifesto, therefore, promises several measures to revive the state’s economy and governance.