The model for bringing industrial growth back to south Tamil Nadu

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

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 Vijay Bhaskar, in his book Dravidian Years, 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.

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.

Courtesy: The News Minute