Due to reasons ranging from corruption to bureaucratic inefficiency, industrial growth and employment creation in south Tamil Nadu have plummeted over the past decade.

Woman employee at firecracker unitWoman employee at firecracker unit in Sivakasi, Tamil Nadu
news Opinion Wednesday, July 21, 2021 - 11:59

Tamil Nadu, after Maharashtra, is India’s most industrialised state. Though India managed to grow faster than most developing countries, socio-economic development has rather remained stagnant, with the country’s ranking lower than most south Asian countries. Many industrialised states in India lag behind in socio-economic development. Tamil Nadu’s growth model, however, is unique to India. It is the only state in India that has managed to record a very high level of industrial growth without compromising socio-economic development.

According to several studies done on the Gini Index of various Indian states (a method used to estimate income or wealth inequality), Tamil Nadu has among the lowest Gini scores, given its size and other factors – meaning it has among the lowest inequality in the country. Another distinguishing factor about the TN model of industrial development is the spatial spread of the process of industrialisation. Professor M Vijaybhaskar, in his book The Dravidian Model, used Herfindahl–Hirschman Index (HHI), to measure the spatial concentration of industrialisation in districts. His study found the index number for TN as the lowest in India, at 796, as against 867 in Maharashtra and 1,076 in Gujarat. This suggests that enterprises are relatively better distributed across sub-regions in the state, indicating a better spatial spread. Apart from special distribution of industries, TN ranks number one when it comes to inclusivity and caste-based distribution of entrepreneurs. Such inclusive growth was made possible by Dravidian politics, which developed both physical and social infrastructure, including health and education.

A decade-long lag 

In spite of such inclusivity, south Tamil Nadu, a region that was once industrially robust — for example Sivakasi was called as the little Japan of India — has lagged behind in industrial growth and employment generation over the last 10 years. This was majorly due to lack of interest shown by the previous AIADMK government. 

Over the past decade, under the AIADMK government, the industrial growth and overall employment creation in South Tamil Nadu has plummeted. Though the previous government announced a slew of projects with much fanfare, nothing much has happened on the ground. Reasons range from corruption and bureaucratic inefficiency to red-tapism and policy paralysis.

Re-starting south TN

This problem has to be tackled at two levels, and the first would be to prevent the brain drain of south Tamil Nadu. Educated youth now move to major cities such as Chennai and Bengaluru for career opportunities. To retain them in the region, it is necessary to develop a start-up and innovation-ecosystem in districts of southern Tamil Nadu.

Start-ups play a major role in developing our economy and job creation. Most governments, across the developing economies, do not give the same importance to promotion of start-ups in comparison to that given for attracting FDIs. Numerous studies have shown that FDI attraction does not mean employment generation. 

In many developed economies more than 50% of the jobs are contributed by start-ups. This is the reason why many developed nations are now taking efforts to spread their innovation and start-up hubs spatially. 

Creating a start-up ecosystem does not cost the state a lot of money, but it will warrant the state to do things differently than before. To create a start-up infrastructure, the first and foremost action should be to create entrepreneurial thinking and awareness among the youth. Further, public policy interventions are needed in areas of access to capital, access to talent, access to markets, and a pro-innovation regulatory and fiscal policy. 

The state leadership should make efforts to set up a few Institutes of national importance in south TN such as Indian Institute of Information Technology. Just as TN has organisations such as TIDCO, SIDCO, The Guidance Bureau for promotion of industrial growth, it lacks institutions that are primarily focussed on start-up/innovation promotion and knowledge sharing. Although Tamil Nadu has a dedicated institution, Entrepreneurship Development and Innovation Institute, for promotion of entrepreneurship and innovation, it has to be revamped completely. The output of the organisation has been negligible and suffers from high level bureaucratic interference. Any start-up or innovation fostering institute should be left to the private sector and be kept away from the reach of IAS and related services.

The immediate efforts of the state government should be to set up innovation promotion clusters across towns, including Madurai, Sivakasi, Tirunelveli and Tuticorin, thereby providing a paradigm shift to their growth trajectories. 

Best case example for start-up promotion is the Indian state of Telangana. The government has set up numerous eco-system enablers for start-ups and entrepreneurs, such as WE-HUB, T-WORKS, T-HUB, RICH, Emerging Technologies TSIC and TASK.

Blue-collar employment in food and textiles 

The second level at which the problem has to be tackled is employment opportunities for blue-collared workers. 

One of the most prominent industrial towns south of Tamil Nadu, Sivakasi, is known for firecrackers and matchbox manufacturing, and also known as the printing capital of India, employing about 40,000 people. However, due to various issues ranging from environment to changing business models, growth in most of these industries have either stagnated or plummeted.

Food processing and agro-industries hold a lot of potential for this region, as more than 50% of the Tamil Nadu population still depends on agriculture. Also, more than 40% of the perishable agricultural produce is getting wasted, due to lack of storage facilities. Taking advantage of the proximity with Kerala and Tuticorin port, efforts should be taken to set up Mega Food Processing Parks, under the Union Food processing Ministry Scheme, at Tuticorin, Kanyakumari, Ramanathapuram and Virudhunagar. Tuticorin food processing parks could be used to produce seafood related produce and then exported using Tuticorin port.

Apart from Food Parks, the government should take initiatives to increase the penetration of cold storages. However, the government should also take into consideration that more than half a dozen food parks initiated by the previous government have failed to take off, including the one at Virudhunagar. Therefore, before jumping in to announce these food parks, the TN government should undertake a comprehensive study to understand the reasons behind the failure for other similar projects to take off. 

Another focus area could be textiles, specifically garmenting. Under the Union Budget in February 2021, eight Mega Investment Textile Parks, each costing about INR 1000 crores, were announced across India. These projects are expected to be undertaken in PPP mode. A MITP for Tuticorin would help in generating an additional 20000 jobs for the region.

But similar to food processing parks, more than a dozen textile processing parks set up under govt of India/TN’s SITP have not taken off. For example, Southern District Processing, which was expected to come up in Virudhunagar at a cost of INR 150 crores, has not taken off even 5 years since the project was approved. Most of the ‘PPP’ based integrated industrial parks that were announced in Tamil Nadu over the last 10 years have not taken off. In fact, the total grant utilization for Integrated Textile Parks and Mega Food Parks, remains at an appalling 6% and 0% respectively. 

The primary reason for this is the institutional and structural weakness that the state's governmental organisations face. As per sources, the Kanchipuram Silk Park, approved by the DMK govt in Jan 2011, had to wait for 4 years under AIADMK Govt for land allocation, and then several years to obtain environmental and other clearances. The author, based on his own examination, identifies that delay in land allocation, obtaining approvals, corruption and failure in obtaining a bank as reasons for failure of these projects. Therefore, before approving new projects, the state government should undertake a study and identify the reasons for failure of the same. After such a study is undertaken, it should take efforts to strengthen the institutions of the state organisations- such as setting up of Project Management Units, hiring of private sector subject matter experts and upgrading the capacity of the governmental organizations.

Since TN is a healthcare hub, and with AIIMS coming up at Madurai, setting up biotech and pharma industries around south Tamil Nadu would be another rational step. The current pandemic has also made the decision makers across the world realise the need to augment drug manufacturing capacity, apart from increased spending on health care. 

As per UNIDO study, energy intensity fell almost 44% in India in 2019, and despite the decline, India was the most energy‑intensive manufacturing economy that year. So while focussing to promote industrial development, the government should also aim to strive for inclusive and sustainable industrial growth. Tamil Nadu has made good strides when it comes to developing alternative energy, but like most developing countries has faltered when it comes to mitigating environmental degradation that comes with Industrial growth. The primary example for the same would be the Tuticorin Sterlite Protest. Another buzz word, going around industrial development is ‘circular economy.’ A World Bank report identifies that circular economy interventions are not just environmentally beneficial but also economically viable, and therefore, could improve the competitiveness of industrial parks and tenant firms. For example: Development of Eco Industrial Parks would be the future. 

Like other parts of the state, youth of southern Tamil Nadu have very high expectations and hope from the new government. The government of Tamil Nadu needs to set up a high level task force under the Chief Minister to prepare the action plan and monitor the execution of the same to put southern districts on a high growth trajectory which is sustainable, inclusive and holistic. Such inclusivity and sustainability are part of the Dravidian growth model, which DMK has mastered since 1967.

The author is a co-founder of Oxford Policy Advisory Group, and an Executive Co-coordinator of Dravidian Professionals Forum. He is an alumnus of the University of Oxford and Paris Institute of Political Studies.

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