Tamil Nadu should focus on producing more unicorns and at the same time attract more investments towards export-led labour intensive sectors to achieve a broad-based growth dynamism, said India’s former Chief Economic Advisor Arvind Subramanian.

“If you look at the boom sector in India in the last 3 years, it is the unicorn sector. Using cheap finance, technology and software advantage, companies that are very dynamic have been seeing rapid growth. But, of the 80-odd unicorns in India, only three are from Chennai,” said Subramanian.

“Even in the most dynamic sector where you expect Tamil Nadu to do well, it actually lags behind. So, there is something that needs to be picked up or revived and the current government is trying to do that,” he added.

He was addressing a virtual session titled, “What are Tamil Nadu’s major development challenges? How can policy respond?” organised by the Chennai International Centre (CIC) on Monday.

Subramanian is part of Tamil Nadu government’s recently formed economic advisory council which includes leading economists like Jean Dreze, Esther Duflo, former RBI governor Raghuram Rajan and former Union finance secretary S Narayan.

‘Historical advantage’

“But that (creating unicorns) alone is not going to be enough. If you want to reclaim much more broad growth dynamism in Tamil Nadu, it has to be labour intensive growth. I think in some ways the clothing, footwear and automobile are sectors where Tamil Nadu had some advantage historically and therefore getting investment back in these sectors is crucial,” he said.

He also added that the opportunity in these sectors has risen because China has given up about $150 billion of exports in these sectors since 2010.

“That vacuum is waiting to be filled. At the moment, that vacuum has been filled by Vietnam, Bangladesh, Indonesia and Thailand. India is actually using very little of that space and Tamil Nadu is really well placed to actually grab some of those opportunities,” Subramanian said.

Terming Tamil Nadu as a model State in delivering social welfare programmes, Subramanian said the present State government is trying to further improve the efficiency of social safety net delivery by filling the gaps and deficiencies.

“My personal view is that completing the social safety net requires having something like universal basic income so that everyone in the State has a certain income which can provide them cushion to become an entrepreneur to borrow or spend on education. This is not to replace the existing social safety net but to complete it,” he said.

Areas of reform

Subramanian said the two big areas for reform and development of Tamil Nadu would be raising resources through innovative property taxes and resolving the chronic problem of the power sector.

He noted that despite being the most urbanised State in the country, property tax of ₹2,500 crore generated by Tamil Nadu is much lower than other less-urbanised States like Maharashtra, Karnataka and Gujarat.

“The debt of the utility company Tangedco is very huge. It’s one single contributor to destabilising Tamil Nadu’s resource and macro-economic position and that needs to be worked on,” he added.

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