Significance of Decentralized industrialization model

Source-This post on Significance of Decentralized industrialization model has been created based on the article “Explained: Tamil Nadu’s decentralized industrialization model” published in “The Indian Express” on 16 April 2024.

UPSC syllabus-GS Paper-3– Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.

Context-The article highlights the reason behind Tamil Nadu’s success in achieving industrialization and diversification beyond agriculture.Tamilnadu  is India’s No.1 state in terms of economic complexity, measured by the diversity of its gross domestic product (GDP) and employment profile.

What is the share of respective industries in Tamilnadu ‘s GDP?

According to the data table, Tamil Nadu’s farm sector contributes less to its gross value added (GVA) and employs fewer people compared to the national average. However, the state has higher shares of industry, services, and construction in its economy compared to the whole of India.

What are the reasons behind TN’s relative success in achieving industrialization and diversification beyond agriculture?

1) Cluster-based industrialization- Tamil Nadu’s economic shift hasn’t been driven much by big corporations but by medium-sized businesses whose turnover range from Rs 100 crore to Rs 5,000 crore. The state’s industrialization has also been more widespread and decentralized, focusing on the development of clusters.
For ex- Tirupur for cotton knitwear, Coimbatore for spinning mills and engineering goods, Sivakasi for safety matches etc.

2) Sub-specialized clusters-There are many sub-specialized clusters that have developed in small towns or areas near cities in Tamilnadu.These clusters provide jobs for people from nearby villages and prevent rural to urban migration.
Further, these clusters have helped in providing job opportunities beyond farming and reducing the number of agriculture dependent population in Tamilnadu.

Read more- Challenges with India’s service-driven growth

3) Grass root entrepreneurship– Recent decentralized industrialization in Tamil Nadu has been led by entrepreneurs from ordinary farming backgrounds and local merchant communities.

For ex-Coimbatore’s spinning mills, foundries, machines and pumps & valves etc ,were mostly started by Kammavar Naidus.

4) Diverse entrepreneurial culture– Tamil Nadu’s entrepreneurial culture is diverse, spreading among different communities and across various industries. For ex- Christians-MRF, Johnson Lifts and Aachi Masala Foods and Muslims -Farida Group etc.

The grassroots entrepreneurship, along with substantial investments in public health and education, helps in explaining Tamil Nadu’s relative success in industrialization and diversification away from agriculture.

Question for practice

What factors contributed to Tamil Nadu’s success in industrialization and diversification beyond agriculture?