Decentralized Industrialisation in Tamil Nadu – UPSC

Decentralized Industrialisation in Tamil Nadu marks a pivotal shift in the economic landscape of the region, embodying a strategic departure from the centralized model that dominated the state’s industrial development for decades. Rooted in the principles of fostering local entrepreneurship, equitable growth, and sustainable development, this approach seeks to empower diverse communities and regions across Tamil Nadu. By distributing industrial activities across the state, it aims to mitigate urban-centric pressures, harness local resources efficiently, and catalyze inclusive prosperity. Through a blend of policy initiatives, infrastructural investments, and grassroots participation, Tamil Nadu’s decentralized industrialization endeavors to unlock the full potential of its diverse economic fabric while fostering resilience and self-reliance in the face of global economic dynamics.

Tags:GS–3, Industrial Policy– Infrastructure– Growth & Development– Industrial Revolution 

For Prelims: Gross Value Added (GVA), Decentralised Industrialisation Model, Cluster Development, Production-Linked Incentive, Service sector 

For Mains: Role of cluster capitalists in industrial development, India’s Industrial Sector, Government Initiatives for Growth of the Industrial Sector 

Context:    

• The economic terrain of Tamil Nadu is experiencing a notable metamorphosis, transitioning from its agricultural foundations towards a more diversified and industrialised structure. 
• This evolution is predominantly credited to the rise of cluster capitalists and grassroots entrepreneurs who are spearheading advancements across multiple industrial domains. 

How Diversified and Industrialised is Tamil Nadu’s Economy? 

• Tamil Nadu’s farm sector contributes 12.6% to its gross value added (GVA) and employs 28.9% of its labour force, which is lower than the national average. 
• The state has a higher proportion of industry, services, and construction sectors in its economy compared to the national average. Within Tamil Nadu, agriculture is diverse, with the livestock sub sector contributing 45.3% to the farm GVA, the highest among all states. 
• Tamil Nadu has developed numerous industry clusters across sectors like textiles, engineering, leather, and food processing. 
• Gujarat’s industrial sector generates 43.4% of the state’s GVA and employs 24.6% of its workforce, higher than Tamil Nadu’s 22.7% and 17.9%, respectively. 
• However, Gujarat has a higher share of agriculture in its GVA (15.9%) and workforce (41.8%) compared to Tamil Nadu’s 12.6% and 28.9%. This indicates that Gujarat’s economy is less diversified and balanced compared to Tamil Nadu’s. 

Factors have Driven Tamil Nadu’s Economic Transformation: 

1. Decentralised Industrialization: 

• Tamil Nadu hosts only a few major business entities with annual revenues exceeding Rs 15,000 crore. 
• The state’s economic transformation is predominantly fueled by medium-scale businesses, ranging from Rs 100 crore to Rs 5,000 crore, with some even reaching Rs 5,000-10,000 crore. 
• Industrialization has been decentralised, facilitated by the development of clusters, leading to a more diverse and balanced economic landscape. 

2. Cluster-Based Development: 

• Cluster development involves concentrating businesses in specific geographic areas to enhance productivity and regional efficiency. 
• Successful clusters in Tamil Nadu include Tirupur for cotton knitwear, employing 800,000 people; Coimbatore for spinning mills and engineering goods; and Sivakasi for safety matches, firecrackers, and printing. 

• These clusters not only create jobs but also foster entrepreneurship and innovation, contributing significantly to the state’s economic growth. 

3. Diversification Beyond Agriculture: 

• Employment opportunities in cluster towns have reduced Tamil Nadu’s reliance on agriculture, facilitating diversification into other sectors. This shift broadens the state’s economic base and provides alternative job avenues. 

4. Entrepreneurship from Below: 

• Entrepreneurs from ordinary backgrounds, including peasant stock and provincial mercantile castes, have been instrumental in Tamil Nadu’s economic progress. 
• Diverse community involvement has played a crucial role in achieving industrialization and diversification beyond agriculture. 

5. Social Progress Indices: 

• Tamil Nadu’s emphasis on public health and education investments has resulted in high social progress indices. This focus on social development has created an enabling environment for economic growth, leading to enhanced living standards and economic opportunities for residents. 

The Decentralised Industrialisation Model:  

About Decentralisation: 

• Decentralisation involves distributing powers and functions across various political and economic entities in society, encompassing decision-making, ownership, and production structures. 

Key Features: 

• Industrial activities dispersed across rural and peri-urban areas, reducing reliance on urban centres. 
• Promotion of small and cottage industries owned by local communities, fostering entrepreneurship and empowerment. 
• Emphasis on labour-intensive production methods to create jobs and alleviate rural poverty. 
• Utilisation of local resources and skills for sustainable development and meeting local needs. 
• Interdependence among village industries creates a self-sustaining economic ecosystem. 
• Equalisation of production and distribution through decentralised production units. 

Benefits: 

• Balanced regional development and reduced spatial inequalities. 
• Inclusive growth by providing economic opportunities to rural communities. 
• Enhanced resilience to economic shocks through diversified industrial activities. 
• Community participation and ownership in the development process. 
• Support for sustainable development by efficient resource utilisation and reduced environmental impacts. 

Challenges: 

• Limited technical capacity leading to inefficiency. 
• Potential increased costs due to loss of economies of scale in procurement. 
• Uneven availability of skilled labour across regions, resulting in skill gaps in certain areas. 

Initiatives for the Growth of the Industrial Sector in India: 

• Production-Linked Incentive (PLI); 
• PM Gati Shakti- National Master Plan; 
• Bharatmala and Sagarmala Project; 
• Start-up India; 
• Make in India 2.0; 
• Atmanirbhar Bharat Campaign; 
• Special Economic Zones. 

UPSC Civil Services Examination, Previous Year Questions (PYQs) 

Prelims 

Q:1 In the ‘Index of Eight Core Industries’, which one of the following is given the highest weight? (2015) 

(a) Coal production 
(b) Electricity generation 
(c) Fertiliser production 
(d) Steel production 

Ans: (b) 

Mains 

Q.1 “Industrial growth rate has lagged behind in the overall growth of Gross-Domestic-Product(GDP) in the post-reform period” Give reasons. How far are the recent changes in Industrial Policy capable of increasing the industrial growth rate? (2017) 

Q.2 Normally countries shift from agriculture to industry and then later to services, but India shifted directly from agriculture to services. What are the reasons for the huge growth of services vis-a-vis the industry in the country? Can India become a developed country without a strong industrial base? (2014) 

Source: (IE) 

FAQs

Q: What is decentralized industrialization in Tamil Nadu?

Decentralized industrialization in Tamil Nadu refers to the strategic dispersal of industrial activities across various regions within the state, aiming to promote balanced economic growth and development. Instead of concentrating industries in a few urban centers, this approach involves establishing industrial units in rural and semi-urban areas, thereby reducing regional disparities and fostering inclusive progress.

Q: What are the key benefits of decentralized industrialization in Tamil Nadu?

Decentralized industrialization offers several advantages, including:

• Regional Development: It facilitates the equitable distribution of economic opportunities, promoting growth in rural and underdeveloped areas.
• Employment Generation: By establishing industries closer to rural populations, it creates job opportunities locally, reducing urban migration and alleviating pressure on urban infrastructure.
• Resource Utilization: Utilizing local resources efficiently, such as land, labor, and raw materials, contributes to sustainable development and minimizes transportation costs.
• Resilience: A decentralized industrial base enhances resilience against economic shocks by diversifying the economy and reducing dependence on specific industries or regions.
• Entrepreneurship: Encourages entrepreneurship and small-scale industries, fostering a culture of innovation and self-reliance.

Q: How does the government support decentralized industrialization in Tamil Nadu?

The government of Tamil Nadu implements various policies and initiatives to promote decentralized industrialization, including:

• Incentives: Offering financial incentives, subsidies, and tax breaks to industries setting up operations in rural and semi-urban areas.
• Infrastructure Development: Investing in infrastructure such as roads, power supply, and telecommunications to improve connectivity and accessibility to industrial sites.
• Skill Development: Facilitating skill development programs and vocational training to empower local communities and enhance their employability.
• Cluster Development: Promoting the clustering of similar industries in specific regions to create synergies and support networks.
• Regulatory Support: Streamlining regulatory procedures and providing assistance with permits and clearances to facilitate ease of doing business.

Q: What are some successful examples of decentralized industrialization projects in Tamil Nadu?

Tamil Nadu has witnessed several successful decentralized industrialization initiatives, including:

• Micro, Small, and Medium Enterprises (MSMEs): Numerous MSMEs have flourished in rural and semi-urban areas, producing a diverse range of products from textiles and handicrafts to agro-based industries.
• Industrial Parks: Development of industrial parks and estates in peripheral regions, providing infrastructure and logistical support to industries while creating employment opportunities.
• Agro-processing Units: Establishment of agro-processing units near agricultural belts, leveraging local produce and adding value to the agricultural supply chain.
• Renewable Energy Projects: Setting up renewable energy projects such as solar and wind farms in rural areas, harnessing natural resources and promoting sustainable development.

Q: What are the challenges facing decentralized industrialization in Tamil Nadu?

Despite its benefits, decentralized industrialization also faces certain challenges, including:

• Infrastructure Deficiencies: Inadequate infrastructure such as roads, power, and water supply in rural areas can hinder industrial growth and investment.
• Skill Shortages: Limited availability of skilled labor and technical expertise in rural areas may pose challenges for industries requiring specialized knowledge.
• Access to Finance: Difficulty in accessing financing and credit facilities for small-scale entrepreneurs and rural enterprises can impede their growth and sustainability.
• Market Access: Limited market access and connectivity to urban centers and global markets may restrict the expansion prospects of decentralized industries.
• Policy Implementation: Ensuring effective implementation of decentralized industrialization policies and overcoming bureaucratic hurdles requires sustained efforts and coordination between various stakeholders.

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