How Tamil Nadu turned ghost districts into industrial hotbeds

For more than two decades, Karisal Kulam remained a ghost hamlet. Not any longer. Villagers have slowly begun to return over the last two years.

The reason: an industrial park. It has sprung up at Gangaikondan, a town just across the river.

Companies like Tata Solar, Yokohama Tyres, Britannia Industries, Bosch and First Solar have set up their units in the park. People around its villages have been offered jobs. Communal tensions have subsequently eased.

“Better law and order situation plus job opportunities are bringing back the residents of Karisal Kulam,” K. P. Karthikeyan, the managing director of Elcot, Tamil Nadu’s nodal agency for promoting, developing and implementing IT and e-governance initiatives, said. He was, till recently, the collector of Tirunelveli district.

At the other end of the state, in Krishnagiri district of northern Tamil Nadu, women were, till recently, seen as a liability. The district’s sex ratio, at 963 women to 1,000 men, is lower than the state average of 996, the 2011 Census of India shows. Sex determination and abortion were rampant. Female literacy was a low 57% and girls were rarely educated beyond the 10th standard. Child marriage was common and so were teenage pregnancies. But a lot changed in the last few years.

Enrolment of girls into colleges and polytechnic institutes have surged. In the last two years, the average age of marriage has risen from 14 years to 21 years, data from Krishnagiri collectorate shows. Child marriages have dropped significantly. It is only a matter of time before the sex ratio improves, experts said. In fact, Krishnagiri is fast losing its status as one of the most backward districts of Tamil Nadu.

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Industrial development, like in the case of Tirunelveli district, is at the heart of this transformation. EV maker Ola Electric, Tata Electronics and Fairway Enterprises, a footwear manufacturer, have invested in the district, predominantly employing women. All of a sudden, thousands of jobs have been created with salaries in the range of ₹15,000 to ₹20,000 per month. Many families now regret not having a girl child at home.

Both the regions mentioned above are success stories when it comes to the Tamil Nadu government’s model of distributed development. It seeks to take industrial investments to the hinterland. This strategy is a clear break from the past where most investments centred around Chennai (northern Tamil Nadu) or large cities such as Coimbatore (western part of the state).

North vs south

The numbers tell the story. According to data from Guidance Tamil Nadu, the industrial promotion arm of the government, the state attracted investments to the tune of ₹7.51 trillion in the last four years. Of this, 38% went to north Tamil Nadu, 30% to the southern region, 11% to the west and 5% to the central region.

“Southern Tamil Nadu barely got any investments in the past. Today, it has received almost a third of the investment the state has attracted. That is a phenomenal change,” explained T.R.B. Rajaa, state minister for industries, investment promotions and commerce. Central Tamil Nadu has also made a good beginning, he added.

Besides Tirunelveli, the southern part of the state includes Tenkasi, Ramanathapuram, Thoothukudi and Kanyakumari districts.

“The Tamil Nadu government took a conscious decision to diversify its industrial base for two reasons. We wanted to bring about a more equitable development. Also, we wanted to ensure strong women participation in the workforce,” Rajaa said.

This strategy will also reduce pressure on large cities like Chennai and Coimbatore.

But implementing this policy was not easy as demanding investors, spoiled for choice, preferred Chennai or threatened to move to another state.

Winning VinFast

A few years ago, VinFast, a Vietnamese electric vehicle major, decided to invest ₹16,000 crore in a manufacturing facility in India. The company’s officials visited six states and scoured 15 locations.

“I heard that they had almost finalised a location which was outside Tamil Nadu,” recalled Rajaa. “It was December 2023 and I decided to give one final shot.”

He packed his bags and landed in Vietnam. He almost regretted that decision.

The VinFast team first sought Ford India’s manufacturing facility which is not in operation today. When told that it would not be possible, as the US auto major had plans to restart operations, the company insisted on a suitable location in Chennai, an established automotive hub.

But Rajaa pitched for Thoothukudi in southern Tamil Nadu. Initially, VinFast wasn’t impressed. After three days of negotiations, the needle moved. The cost of land in Thoothukudi was far lower compared to Chennai; the region also had easy access to the Tuticorin port, less busier than the one in Chennai. The deal was struck.

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“We wanted to serve not only the domestic market but also the external market. We wanted to be located very close to a seaport and an airport. Thoothukudi satisfied this requirement,” Pham Sanh Chau, VinFast’s Asia CEO, told the media later.

The state government just didn’t stop at selling the region. It ensured the availability of human resources. About 344 students from nine local polytechnic institutes were trained for 21 days on technical, aptitude and communication skills. They were next sent to VinFast for interviews. The company selected about 200 of them.

Then came Jabil

Similarly Jabil Inc, an American electronics manufacturer and a key supplier to Apple, wanted to invest ₹2,000 crore for a facility near Chennai. After all, 40% of all smartphones shipped from India come from Kanchipuram district, bordering Chennai. Foxconn and other smartphone manufacturers are located here.

However, the state government proposed Tiruchirappalli in central Tamil Nadu. The company was convinced only after its executives visited the region.

“They were impressed by the Tiruchirapalli airport and the talent produced by higher education institutions in the area, such as NIT Trichy,” said Arun Roy, industry secretary, government of Tamil Nadu. In September 2024, the company announced that it had signed a memorandum of understanding to expand India operations in Tiruchirappalli.

“India is emerging as a key manufacturing hub. Our expansion in India will enable Jabil to meet and grow with the future needs of our customers and complement our existing facility in Pune, Maharashtra, in operation since 2003,” Matt Crowley, executive vice president of global business units at Jabil, noted in a press statement.

VinFast and Jabil didn’t respond to Mint’s request for comments till the time of going to press.

District SWOT

What is the rationale followed while nudging investors to places beyond Chennai?

Such places are not shown blindly, said Roy. “We map a region’s strengths with the needs of the investor and offer a very compelling preposition,” he explained.

The government has completed an elaborate exercise to map each district’s strengths and weaknesses. For instance, Kanyakumari district is not conducive for manufacturing. Land and labour availability is limited. The gross enrolment ratio for higher education is high. This district, officials said, is thus more suited for services-based investment.

Tirunelveli and Thoothukudi districts, on the other hand, are more suited for manufacturing. Labour is in abundance and so is land availability. Add to that the presence of the Tuticorin port. Export-import based sectors find this location ideal.

Kallakurichi, Perambalur and Tiruvannamalai districts are primarily agriculture based with abundant supply of semi-skilled labour. It is ideally suited for sectors such as non-leather footwear which need not be close to airports/ports but need abundant semi-skilled people, especially women.

Top non-leather footwear manufacturers in the world—such as Feng Tay, Shoe Town and Pau Chan—have invested in these areas or are in the process of doing so.

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Tata Electronics, meanwhile, chose to locate its facility in Krishnagiri as availability of semi-skilled labour was in plenty, both locally and in the neighbouring districts. Proximity to Bengaluru also helped. Ola Electric set up its bike unit there as nearby Hosur already had a strong automotive eco-system.

A,B and C

Tamil Nadu is classified into three categories—A, B and C—based on the extent of industrialization.

‘C’ category, which is the least industrialized, gets higher benefits, be it capital subsidy, concession for land costs or stamp duties.

Incentives apart, investors often find less industrialized locations better for multiple reasons. Like we mentioned earlier, large parcels of land can be had at cheaper prices, keeping project costs under control. The cost of labour is lower, too, so are attrition levels.

Incentives apart, investors often find less industrialized locations better for multiple reasons. Large parcels of land can be had at cheaper prices, keeping project costs under control. The cost of labour is lower, too.

Other Indian states could emulate this distributed development model of Tamil Nadu, said M. Suresh Babu, director, Madras Institute of Development Studies. “It will lead to a more balanced development and tackle the inequality India’s economy is witnessing,” he added.

Tamil Nadu, he further said, has benefitted from historical factors and policies followed by successive governments. It is uniformly urbanized. Soft infrastructure is good across the state—be it educational institutions or healthcare facilities. So is hard infrastructure such as roads, airports, ports and availability of power. Any airport can be accessed in less than three hours and a sea port in six hours.

Where’s the pub?

While the going is good, Tamil Nadu does face some challenges.

Availability of land is one of them, particularly in hot destinations. The government says it is unable to push investments into western Tamil Nadu because of such issues. It is in the process of building a 50,000 acre land bank.

A second area of concern is social infrastructure, particularly entertainment. There is a need for more 5-star hotels, malls and multiplexes, especially in smaller towns. For longer-term human resources development, such infrastructure is fast becoming a hygiene factor.

Another issue is pubs. Think Bengaluru—pubs keep the city’s young workforce hooked, post work hours. Most Tamil Nadu cities simply fade in comparison.

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“While the Tamil Nadu government has no qualms in opening liquor shops in every nook and corner of the state, it sees cultural issues when it comes to licensing pubs and bars,” said an entrepreneur who didn’t want to be identified. “This double standard puts us in a competitive disadvantage, especially in sectors that employ a lot of young people,” he added.

China play

That said, the distributed development model appears to be working so far, as numbers cited above shows.

But this is not the first time that Tamil Nadu has tried this. The first industrial estate was set up in Ranipet, in northern Tamil Nadu, way back in 1971. The 2007 Industrial Policy gave special incentives to investments made in southern Tamil Nadu. These measures did not bring about any rapid industrialization.

What has worked now is a combination of factors—a more calibrated approach from the state as well as geo-political developments.

“China+1 is a great opportunity. Global brands want to de-risk their operations and find India and Tamil Nadu ideal to invest in,” said industry minister Rajaa adding “we will be doing a great injustice to future generations if we do not fully capitalize on this opportunity.”