Tamil Nadu’s decentralized industrialisation model

GS Paper III

News Excerpts: 

Part of Tamil Nadu's success in industrialization and diversification beyond agriculture can be attributed to its  decentralized industrialisation model i.e cluster capitalists and grassroots entrepreneurs.

More About the News: 

The agricultural sector's contribution to Tamil Nadu's Gross Value Added (GVA), which represents GDP minus product taxes and subsidies, as well as its proportion of the employed labor force, are both notably lower than the national average. This reduced reliance on agriculture is balanced by increased shares of industry, services, and construction within the state's economy compared to the overall Indian scenario.

Economic Complexity in Agriculture Sector: 

  • Gujarat surpasses Tamil Nadu in terms of industrialization, with the factory sector contributing 43.4% to the state's Gross Value Added (GVA) and engaging 24.6% of its workforce, compared to Tamil Nadu's 22.7% and 17.9%, respectively. 
  • However, Gujarat also relies more heavily on agriculture, with the sector accounting for a higher share of its GVA (15.9%) and workforce (41.8%) compared to Tamil Nadu's 12.6% and 28.9%, respectively. This indicates that Gujarat's economy is less diversified and balanced compared to Tamil Nadu's.
  • Another aspect highlighting economic complexity is the agricultural sector itself. In Tamil Nadu, approximately 45.3% of the agricultural GVA comes from the livestock subsector, the highest among all states and well above the all-India average of 30.2%. 
  • Consequently, Tamil Nadu is home to India's largest private dairy company (Hatsun Agro Product), leading broiler enterprise (Suguna Foods), egg processor (SKM Group), and is recognized as the "egg capital" (Namakkal).

Cluster-based industrialisation:

  • Tamil Nadu boasts only a handful of large business conglomerates with annual revenues exceeding Rs 15,000 crore, such as TVS, Murugappa, MRF, and Apollo Hospitals. However, they do not match the turnover scale of industry giants like Tata, Reliance, Aditya Birla, Adani, Mahindra, JSW, Vedanta, Bharti, Infosys, HCL, or Wipro.
  • Rather than relying on so-called Big Capital, Tamil Nadu's economic transformation owes much to medium-scale businesses with turnovers ranging from Rs 100 crore to Rs 5,000 crore. Some, like Hatsun and Suguna, have even graduated to the Rs 5,000-10,000 crore level. The state's industrialization has been notably decentralized and spread out, facilitated by the development of various clusters.
  • Several of these clusters are renowned, such as Tirupur for cotton knitwear, Coimbatore for spinning mills and engineering goods, Sivakasi for safety matches and firecrackers, and Salem, Erode, Karur, and Somanur for powerlooms and home textiles. Many cluster towns serve as hubs for multiple industries, offering employment opportunities to locals and reducing the dependence on agriculture.

Entrepreneurship from below: 

  • Early industrialists in Tamil Nadu were predominantly from the Nattukottai Chettiars and Brahmin communities. The Chettiars, known for their traditional banking and trading expertise, had extensive operations in Southeast Asia and Sri Lanka. 
    • Disruptions caused by World War II and the Burmese nationalist movement prompted many to reinvest their wealth back home. 
    • Prominent figures among them included Annamalai Chettiar (founder of the M.A. Chidambaram and Chettinad groups), A.M.M. 
    • Murugappa Chettiar (Murugappa Group), Karumuttu Thiagaraja Chettiar (a textile magnate), and Alagappa Chettiar (with interests in textiles, insurance, hotels, and education).
  • However, the recent decentralization of industrialization in Tamil Nadu has been driven by entrepreneurs from more ordinary peasant backgrounds and provincial mercantile castes. 
    • For example, Coimbatore's spinning mills, foundries, machining, pumps & valves, textile equipment, and compressor making units were largely initiated by Kammavar Naidus. 
    • Prominent businesses like Suguna Foods, CRI Pumps, Elgi Equipment, and Lakshmi Machine Works have founders from this community.
  • In clusters such as Tirupur, Erode, Salem, Namakkal, Karur, and Dindigul, the main contributors have been Kongu Vellalar or Gounders. 
    • This community also includes the owners of the Coimbatore-based Sakthi and Bannari Amman groups, as well as prominent politicians like former Chief Minister Edappadi Palaniswami and Bharatiya Janata Party's state president K. Annamalai.
  • Industries like Sivakasi's fireworks, match, and printing industries have been predominantly built by Nadars
    • However, entrepreneurs from other communities such as Raju (Ramco Group and Adyar Ananda Bhavan) and Udayar (Pothys) have also made significant contributions in this region. 
    • Many of them have successfully created popular product brands like Hatsun (‘Arun’ ice-cream and ‘Arokya’ milk), V.V.V. & Sons (‘Idhayam’ sesame oil), and Kaleesuwari Refinery (‘Gold Winner’ sunflower oil).
  • What's remarkable about Tamil Nadu's entrepreneurial culture is its inclusivity across diverse communities and industries.
    •  This includes contributions from Christians (MRF, Johnson Lifts, and Aachi Masala Foods) and Muslims (Farida Group). 
    • C.K. Ranganathan, a Mudaliar, founded CavinKare and pioneered single-use sachets of 'Chik' shampoo, predating similar concepts by Hindustan Unilever. 
    • His brother, C.K. Kumaravel, runs Naturals Salon & Spa, with nearly 700 outlets across India.


The grassroots or the Bottoms up entrepreneurship seen in Tamil Nadu, coupled with substantial investments in public health and education, appears to play a significant role in the state's success in industrialization and economic diversification beyond agriculture. Given the ongoing Make in India initiative by the Government of India, other states could potentially adopt the Tamil Nadu model, tailoring it to their own circumstances and relevant factors.

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