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INDIAN STATESEconomy and Business
INDIAN STATESEconomy and Business
TAMIL NADU PAGE 3
Executive Summary 5
Economic Snapshot 7
The State Economy 9
Infrastructure 11Social infrastructure 11Access infrastructure 11Communications infrastructure 12Financial infrastructure 12Industrial infrastructure 12
State Policy 13Infrastructure policy 13e-Governance 14IT policy 14Biotech policy 14
Business Opportunities 15Key industries 16Exports 17Investment 18Potential hubs for investment 19
Key Players 21
Doing Business in Tamil Nadu 26Indicative list of approvals and clearances 26Cost of setting up business 27Contact for information 28
A report by KPMG for IBEF
TAMIL NADU PAGE 5
by government agencies and a continuous drive to upgrade its infrastructure to world-class standards.A number of proactive policy measures such as singlewindow clearances and easing entry barriers forinvestors have made it a chosen destination forForeign Direct Investment. Interestingly,Tamil Nadu is one of the first states to formulate an ITES andBiotech Policy.The state is vigorously highlighting thebusiness opportunities it has to offer in the Biotechand IT sectors; funds have been created towardsactively promoting the state at national andinternational trade conferences.
Tamil Nadu has undertaken mega projects in conjunction with the private sector to upgrade the existing infrastructure to world-class standards.A six-lane IT corridor (IT expressway) betweenChennai and Sirueri (IT Bay area) has beencommissioned, P&O Ports investment have made the turnaround time at Chennai port among the leastin the country.The state now boasts of one of thelowest power tariffs in the country.Two submarinecables connecting Chennai and Singapore willsubstantially increase the existing bandwidth forcommunication, making Chennai the ConnectivityGateway of India.
The state has consistently proven to be a leader onseveral economic fronts. All round development hasbeen the cornerstone of economic progress in thestate, with equal attention being paid to all sectors of the economy, ensuring that each sector in theeconomy achieves a high growth rate.
Tamil Nadu is one of the most developed states in the country.The state has succeeded in reducingpoverty levels and raising the standard of living of its people. Literacy levels in the state are amongthe highest in the country, with almost the entirepopulation having access to primary education.
Riding on this economic development and spurring it further is a rapid wave of industrialisation.Tamil Nadu has grown to become one of themanufacturing powerhouses in the country,especially in the textile and automobile sector.The textile-manufacturing units have met withtremendous success, both nationally andinternationally.The state is home to one of the largest automotive component industry in India.A number of international auto giants including Ford and Hyundai have set up manufacturing units in the state.Their investment in the state are to thetune of US$ 1 billion. Chennai has now earned thelabel, Detroit of India.
Tamil Nadu has recorded the fastest growth rate in software exports, 700 per cent from 1998 to 2001.It now has the largest medical transcription facility in Asia; BPO outfits for a number of multinationalsnow operate from Chennai. Chennai is ranked firstamong Indian cities in terms of technology exposureand responsiveness and is rated as the ideal locationfor software projects in India.
The principal reasons for its rapid industrial andservices growth are the proactive policies formulated
Industrial Centres in Tamil Nadu
TAMIL NADU PAGE 7
An Economic Snapshot
Area (sq km) 1,30,000
Population (Million) 62.1
Literacy rate (%) 73.5
Sex ratio (per 1000 males) 986
Length of coastline (km) 1,076 (2nd longest in India)
National highway length (km) 2,002
Domestic airports Chennai,Tiruchirapalli, Coimbatore,Madurai,Tuticorin
International airport Chennai
Major ports Chennai, Ennore and Tuticorin with combined tonnage capacity of 73 MT (24 per cent share in India)
Key industries TextilesLeatherInformation Technology,AutomotiveAuto componentsEngineeringMineral-basedAgro-based
Monthly per capita consumptionexpenditure (US$) 14.7 (4th highest in India)
Market potential value (MPV)* 9 per cent share in India (2nd highest in India)
*Source: MPV is a measure of Means or Prosperity of consumer,Consumption pattern,Awareness, Market support and the size of the market.
Advantage Tamil Nadu
n Highest value addition in the industries
n Fastest growth rate of 700 per cent in software exports
n One of the leading states in the production of automotive components
n Largest capacity for Engineering and Polytechnic education
n Largest IT park in the country
n Highest number of factories and export oriented units
n Landing point for two submarine cables with a total bandwidth of 13 tbps
n Uninterrupted quality power supply to industries at low tariff rates (between US cents 5.9 to US cents 8.0 per kWh)
n Single window policy for all approvals
n One of the first states to articulate an ITES and Biotech policy
further. Tamil Nadu attracts the second largestnumber of foreign tourists; additionally the state hasregistered a compounded annual growth rate (CAGR)of 16 per cent during 1997-2002.
Tamil Nadu is one of the most industrialised states in the country, accounting for 16 per cent of the totalfactories in the country.The factories in Tamil Nadu
TAMIL NADU PAGE 9
THE STATE ECONOMY
Tamil Nadu is one of the most industrialised statesand is the third largest economy in the country.TheState Domestic Product is about US$ 27.4 billion andthe current economic growth rate is 6.1 per cent.Thecurrent exports are around US$ 6,450 million withCAGR of 9 per cent in the past decade.
The growth in manufacturing and services sectors has fed and in turn benefited from the rise in thestandard of living of people in the state.The state is ranked third in the country in per capita stateincome. Per capita state income has grown at an annual compounded growth of 5 per cent perannum*.Tamil Nadu also has a share of 9.1 per centMarket Potential Value in the country, which reflects a high buying power and capacity of the market to absorb new products and services.There has beena significant increase in the proportion of populationin the middle-income group.
The services sector is the dominant contributor tothe Net State Domestic Income. Given 700 per centgrowth in the IT sector in the state, the contributionof the services sector is only going to increase
*At constant prices (1993-94) from 1993-94 to 2000-01(www.indiastat.com)
Per Capita Gross Output in Industries (US$) (P) 2000-01
Tamil Nadu India
Tamil Nadu - Sectoral Contribution to Net State Domestic Income (at constant prices 1993-94)
Agriculture Source: Department of economics and statistics,Tamil Nadu
Growth of contribution of Services sector to state income at constant prices of 1993-94
1993-94 1995-96 2001-02 2003-041998-99
grown in the state are rice, sugarcane and groundnut.The crop yield is substantially higher than the countryand world average.
Tamil Nadu - Yield per hectare (Kg/Ha) in 2003-04
Sugarcane Groundnut Rice
9,192 Kg/Ha 1,552 Kg/Ha 2,308 Kg/Ha
also enjoy a reputation of being extremely efficient.Tamil Nadu has a well-developed manufacturingsector with a high value addition in the factory sector.The state industry has a dominant market share in many manufactured goods.
A significant portion (56 per cent) of the populationcontinues to live in villages and relies on agricultureas their principal source of income.The key crops
Tamil Nadus Share in Indias Output in various industires(in per cent)
35 33 32
Source: Economic Survey of Tamil Nadu
Per Capita Value Added in industries (US$) (P)
Tamil Nadu India
TAMIL NADU PAGE 11
such as those in Singapore and Colombo.The projectwill also help in the development of the proposed 13 minor ports in Tamil Nadu.
The state is endowed with a large water storagecapacity and efficient canal system.A desalinationplant, to be set up in Chennai, is expected to augmentexisting availability.Water harvesting facilities arebeing developed in and around Chennai to checkleakage of fresh water to the sea and replenish the existing groundwater levels.
Tamil Nadu has made progress on the social andeconomic infrastructure front. Education andhealthcare levels in the state have risen considerably.The state government encouraged private sectorparticipation in the process of infrastructuredevelopment.This policy has resulted in rapidexpansion of roadways, railways and capacityenhancement of the ports.
The state has successfully straddled investment in primar