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T.N Economy UPSC NOTE

 Growth rate projection of Tamilnadu

  • Tamil Nadu’s economy may grow at a rate of 8.08% to 10.69% in 2024-25. 

  • Providing these real growth rate figures (as opposed to nominal rates that include the factor of inflation), a study on the State economy.

  • Conducted by C. Rangarajan and K.R. Shanmugam, chairperson and director of the Madras School Economics respectively.

  • Has estimated that in the recently concluded financial year of 2023-24, the State’s growth rate varied from 8.08% to 9.44%.

Comparison with national growth

Tamil Nadu's Economic Performance:

  • Strong economic base: Tamil Nadu boasts the second-largest state economy in India.

  • With a significant industrial sector and a well-developed services sector.

Recent Growth: 

  • Tamil Nadu's Gross State Domestic Product (GSDP) grew at a healthy rate of 8.19% in 2022-23.

  • Exceeding the national GDP growth rate of 7.24% .

  • It's important to note that this follows a period of slower growth pre-pandemic and a faster rebound compared to the national average.

National Economic Growth:

  • India's GDP growth: India's GDP growth rate has fluctuated in recent years. 

  • While it reached 9.05% in 2021-22, it dipped to 7.24% in 2022-23 

Overall Comparison:

  • Tamil Nadu's growth: Tamil Nadu's economy has generally been performing well, with growth exceeding the national average in recent years.

  • This might be due to factors like a strong industrial base and a focus on the services sector.

  • Fluctuations: It's important to consider that both national and state economies can experience fluctuations in growth rates due to various factors.

Reasons for slowdown

  • While Tamil Nadu's economy has been performing well overall, there have been periods of slowdown. 

Here are some reasons that might contribute to an economic slowdown in Tamil Nadu:

Industrial Challenges:

  • Traditional industries: Some traditional industries in Tamil Nadu, like textiles (particularly spinning mills), have faced challenges due to factors like global competition and rising input costs.

  • Infrastructure bottlenecks: Issues like power shortages or inadequate transportation infrastructure can hinder industrial activity and investment.

Other Potential Factors:

  • Impact of national slowdowns: A slowdown in the national economy can indirectly affect Tamil Nadu's growth.

  • Focus on freebies over long-term development: Some argue that an emphasis on populist policies like freebie schemes might divert resources from investments in infrastructure and education, which are crucial for sustained economic growth.

  • Agricultural issues: While agriculture is a significant sector in Tamil Nadu, factors like water scarcity or lack of investment in modern farming techniques can limit its growth potential.

Impact of external factors

  • Slowdown is a relative term. Even during periods of slower growth, Tamil Nadu's economy might still be expanding, just at a slower pace compared to previous years or the national average.

  • The reasons for a slowdown can vary depending on the specific time period and economic climate.

  • It's important to stay updated on current economic news and analysis to understand the specific factors affecting Tamil Nadu's economy.

Public debt concerns

  • Public debt is a major concern in Tamil Nadu, with experts and political parties expressing worries about its sustainability

Rising Debt Levels:

  • Tamil Nadu's public debt has been steadily rising over the past few years

  • Reports suggest it could reach ₹8.33 lakh crore by March 2025.

  • This rise in debt is concerning because it increases the financial burden on the state government.

Debt Sustainability:

  • Studies like one by the Madras School of Economics suggest that Tamil Nadu's current debt level might be unsustainable.

  • This means it could be difficult for the state to manage its debt repayments in the future.

  • Factors like high debt-to-GSDP ratio (ratio of debt to the state's economic output) are used to assess debt sustainability.

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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: T.N Economy UPSC NOTE
T.N Economy UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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