The Tamil Nadu government has once again demonstrated its commitment to balancing economic expansion with social welfare, unveiling a budget that prioritises both industrial progress and inclusive growth. With the 2025-26 budget, presented ahead of next year’s state elections, the MK Stalin-led government continues to push its Dravidian model—a policy framework that has long emphasised equitable development. Significant allocations have been made to welfare schemes targeting women and industrial development, underscoring the state’s ambition to strengthen its economic standing while ensuring broad-based social upliftment.
The state’s first Economic Survey (2024-25) reaffirmed its ambitious goal of becoming a $1 trillion economy by aligning itself with the ‘product nation’ vision. Tamil Nadu is not only an economic powerhouse, but has also made remarkable progress in social development.
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Drivers of economic and social success
According to the Economic Survey, Tamil Nadu’s progressive social policies, robust infrastructure, and large skilled labourforce have placed it on a high-growth trajectory. The state has been consistently ahead of the rest of the country in most socio-economic indicators. Effective administration and a strong commitment to social reform have driven targeted welfare programmes, benefiting specific sections of society. The success of the initiatives such as the mid-day meal programme and the integrated nutrition programme showcased the efficiency of Tamil Nadu’s administrative machinery in delivering complex welfare schemes.
While many social welfare programmes in Tamil Nadu had political origins, they translated into substantial public benefits, reinforcing electoral support. This interdependence ensured their longevity across different political regimes.
Tamil Nadu’s economic growth story
Tamil Nadu is set to maintain a growth rate of over 8% in 2024-25, according to the economic survey. The survey highlights the state’s resilience in maintaining this pace despite national and global economic fluctuations. While the Indian economy saw varying growth rates—7.61% in 2022-23, 9.19% in 2023-24, and a projected 6.48% in 2024-25—Tamil Nadu has consistently outperformed these trends. The state’s success is attributed to its strong policy framework, infrastructure development, and diversified economic base, which have shielded it from external economic shocks.
Despite covering only 4% of India’s land area and 6% of its population, Tamil Nadu remains a major contributor to the national economy. In 2023-24, Tamil Nadu accounted for 9.21% of India’s GDP, highlighting its economic significance. The state gross state domestic product (GSDP) at current prices reached Rs 27.22 trillion in 2023-24, registering a nominal growth rate of 13.71% and a real growth rate of 8.33%.
Tamil Nadu has consistently maintained a per capita income higher than the national average, demonstrating its superior economic performance. The Economic Survey highlights that in 2022-23, Tamil Nadu’s per capita income stood at Rs 2.78 lakh, making it 1.64 times the national average of Rs 1.69 lakh. This places Tamil Nadu as the fourth-largest state in terms of per capita income, reflecting its strong economic fundamentals and high living standards.
Unlike states that depend on a single metropolitan hub for economic expansion—such as Mumbai in Maharashtra or Bengaluru in Karnataka—Tamil Nadu’s economic development is spread across multiple urban centres. This decentralised growth has helped reduce regional disparities and create employment opportunities across the state.
The Economic Survey provides granular insights into Tamil Nadu’s regional economic contributions, noting that the northern region (home to 31.8% of the state’s population) contributed the highest share to the Gross State Domestic Product (GSDP) at 36.6%. The western region, comprising 22.8% of the population, accounted for 29.6% of the state’s GSDP, while the southern and eastern zones contributed 18.8% and 15.1%, respectively.
Challenges due to Union government policies
In his foreword to the Economic Survey, Dr. J Jeyaranjan, Executive Vice-Chairman of the State Planning Commission, emphasised that Tamil Nadu’s economic progress has been achieved despite multiple challenges, including the COVID-19 pandemic and natural disasters such as cyclones and floods. However, he strongly criticised the Union government for its lack of support and restrictive policies, which he argued have constrained Tamil Nadu’s financial autonomy.
The survey highlights key issues such as fiscal borrowing caps, the imposition of NEET, and the NEP 2020, which have collectively stifled the state’s growth potential. The Tamil Nadu government continues to advocate for greater fiscal independence to unlock its full economic potential.
Tamil Nadu’s path to a $1 trillion economy
After assuming office, Chief Minister MK Stalin set an ambitious goal of transforming Tamil Nadu into a $1 trillion economy by 2030. The Economic Survey outlines that to achieve this milestone, the state will need to maintain an annual growth rate exceeding 12%, supported by industrial expansion, infrastructure development, and the adoption of digital and technological advancements.
As of 2023-24, Tamil Nadu’s GSDP stands at Rs 27.22 trillion, with a real growth rate of 8.33%. To meet the $1 trillion target, the survey recommends sustained public and private investments, policy measures to enhance the ease of doing business, and inclusive strategies that ensure equitable development across all regions.
To ensure holistic economic growth, the Economic Survey underscores the importance of accelerating rural entrepreneurship and workforce expansion. Tamil Nadu must leverage its demographic advantage by investing in youth skill development, promoting high-value manufacturing and services, and increasing women’s participation in the workforce.
The survey calls for targeted efforts to integrate emerging technologies into the state’s industrial and service sectors, ensuring businesses remain competitive in an evolving global economy. Strengthening infrastructure, expanding digital access, and enhancing education and vocational training programmes are identified as essential drivers of future growth.
Tamil Nadu’s remarkable blend of social welfare and economic growth positions it as a model for development in India. If the Centre addresses the state’s concerns and facilitates greater fiscal flexibility, Tamil Nadu could further strengthen its role as a leading force in India’s economic landscape. With its forward-looking policies, industrial strength, and commitment to social progress, the state is well on its way to achieving its ambitious economic goals.