Tamil Nadu – A Big Contender for Attracting Investment in India

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Tamil Nadu is an Indian state that lies in the southern part of the Indian Peninsula and is bordered by Pondicherry, Kerala, Karnataka and Andhra Pradesh.  It’s the fifth largest contributor to India’s GDP and the most urbanized state in the country with the highest number of Business enterprises, pegged at 10.56%, compared to the overall population share of 6%.

With Chennai as its capital, Tamil Nadu is the seventh most populous state in India and has the fifth largest economy and the third highest Human Development Index out of 29 Indian states. The state’s economic growth was slowed by the Fiscal crisis that peaked in 1999/2000 forcing its government to implement wide ranging financial and structural reforms. The reform program impacted the economy with a good fiscal adjustment. The five policy notes from the government span fiscal reform and sustainability, improving investment environment, agricultural development, governance challenges and the state’s poverty profile.

The Tamil Nadu Industrial Investment Corporation (TIIC) has proposed to advance nearly Rs.13, 000 million for promotion of industries in the state in the fiscal year 2010/2011. Out of this, about Rs. 1000 million is earmarked for advancing loans for the existing industries and for starting new ventures.  The TIIC earned a profit of about Rs.400 million after a gap of several years for the year 2009/2010 fiscal calendar. The organization has been providing financial assistance at competitive interest rates for the setting up of new industrial units, expansion, modernization and the diversification of existing industries. The State plans to announce a new mining policy, in line with the national policy, this year.

The state’s GDP at 2007 stood at Rs. 2,750,000 million in current prices, a corresponding GDP growth rate of 12.1% for that period. The economy is split into: the services industry, contributing 45% of its economic activities; manufacturing, comprising 34%, and the agricultural sector taking 21%. However, the state’s government has been the major investor in the state with a total of 51% total investments followed by private investors at 29.9% and foreign investments at 14.9%. The city has about 110 industrial parks and efficient infrastructure that has been behind recent major economic successes. The Tamil Nadu Investors Association aims at educating small investors, protecting their interests and promoting investments and entrepreneurship in the state.

Major industrial successes in the state include multinationals and big Indian firms located in the region. They include BMW, Ford, Renault-Nissan, Caterpillar, Hyundai, Mitsubishi Motors, Ashok Leyland, Hindustan, TVS Motors, and Royal Enfield etc in the automobile industry while telecommunication giants include Nokia, Flextronics, Motorola, Sony-Ericsson, Foxconn, Samsung, Cisco, Dell and Moser Baer.