GROWING, GROWING, GROWN: What Factors Contributed to Tamil Nadu's 11.2% Economic Growth in 2024-25?

K R Shanmugam
Tamil Nadu, India’s second-largest state economy, has surged to the top of the growth charts, recording an 11.2% real economic growth in 2024-25, the highest among all states, as per revised estimates from the Ministry of Statistics and Programme Implementation.

This double-digit growth is the state’s best in 14 years, last seen in 2010-11 when it hit 13.1%, and far exceeds the national average of 6.5%. Even the 2023-24 figure has been revised upward to a strong 9.3%.

The exceptional performance is being driven largely by the secondary sector, which includes manufacturing, construction and utilities (electricity, gas and water supply). Manufacturing has shown growth rates of 12.6% in 2023-24 and an even higher 14.7% in 2024-25, making it a major engine of the state’s growth.
Construction has also been a significant contributor, growing at 15.9% and 11.6% during the same periods. As a result, the overall secondary sector recorded growth rates of 13.7% in 2023-24 and 13.4% in 2024-25.

The tertiary (services) sector also saw an acceleration, growing from 7.47% in 2023-24 to 11.3% in 2024-25. Within this sector, real estate witnessed a sharp rise, increasing from 7.33% to 12.42%. Other service sub-sectors, including public administration, transport, hotels and restaurants, and other miscellaneous services, also reported double-digit growth in 2024-25.

The primary sector (which includes agriculture, livestock, forestry and logging, fishing and aquaculture and mining) registered a modest growth of 3.2% in 2024-25, up from 1.2% in 2023-24. Despite this improvement, agriculture continued to post negative growth for the second consecutive year. This underperformance can be largely attributed to the sector’s heavy reliance on monsoon patterns and increasing vulnerability to climatic change.

Tamil Nadu’s manufacturing stands out in comparison to national and peer benchmarks. While India’s manufacturing growth was just 4.5% in 2024-25, Tamil Nadu recorded 14.7%. Similarly, construction growth in Tamil Nadu (11.56%) also outpaced the national average of 9.4%. Maharashtra, a comparable industrially advanced state, posted manufacturing growth of 6.8% in 2023-24 and a much lower 4.25% in 2024-25. Its construction grew by 5.7% and 6.8% during those years. Although Maharashtra’s real estate performed relatively well with 9.5% in 2023-24 and 9% in 2024-25, its overall real economic growth was modest 8% in 2023-24 and 7.3% in 2024-25, much lower than Tamil Nadu’s.

Tamil Nadu also leads the nation in four-year average growth (2021-22 to 2024-25) of manufacturing with an impressive 9.4%, followed by Jharkhand (8.8%) and Karnataka (8.7%). However, in terms of four-year average real GSDP growth, Tamil Nadu ranks sixth at 8.6%. This represents a notable improvement from the 2015-16 to 2018-19 period, when the state ranked ninth, with an average growth of 7.6%. The post-COVID period has clearly marked a turning point for Tamil Nadu, which has strengthened its economic fundamentals and emerged as a national leader in manufacturing-driven growth.

Tamil Nadu continues to assert its status as an industrial powerhouse, contributing 12.7% of India’s manufacturing GDP in 2024-25. The state boasts one of the most developed and diverse industrial ecosystems in India. With about 40,000 factories, Tamil Nadu ranks first. The state is also a leader in the MSME sector, with more than 25 lakh Udyam-registered micro, small and medium enterprises, placing it second in the country.

Key industries in Tamil Nadu include automobiles, clothing, leather and leather products, textiles, computers, electronics, optical products, and machinery and equipment. The state ranks first in the output of motor vehicles, wearing apparel, and leather and leather products, and second in textiles, machinery and equipment, and computer, electronic, and optical products. The state also leads the nation in exports of engineering goods, electronics, ready-made garments, cotton yarn, handloom products, and leather products. Other significant exports include petroleum products and organic and inorganic chemicals.

Tamil Nadu’s New Industrial Policy 2021, Tamil Nadu Semiconductor and Advanced Electronics Policy, Sector-Specific Industrial Parks, Industrial Clusters and Tamil Nadu’s Global Investors Meets have also contributed to the acceleration of manufacturing growth.

While the services sector has historically dominated Tamil Nadu’s economy, accounting for more than 50% of GSDP and achieving an average growth of 11.28% between 2005 and 2006 and 2011-12, its momentum slowed in 2012-13. However, a strong revival in 2024-25 indicated renewed vibrancy in services. Despite the performance of services, it is the secondary sector, particularly manufacturing, that has emerged as the key driver of Tamil Nadu’s overall economic growth in recent years.

Sectoral Growth Performance in Tamil Nadu



(The writer is former director and professor of Madras School of Economics in Chennai)Email your feedback with name and address to southpole.toi@timesofindia.com