Tamil Nadu assumed a prominent position in driving the country’s industrial growth under J Jayalalithaa. However, a comparison of the economic data during her rule between 2001-2006 and 2011-2014 shows that her focus shifted to social spends in later years, with industrial growth taking a backseat

It was arguably during the 2001-06 period that Tamil Nadu’s industrial economy grew at its fastest: it averaged 8.7 per cent a year, next only to Gujarat (11.3 per cent) among its peer set of high-income States, and considerably ahead of Goa, Haryana and Maharashtra.

However, during the 2011-2014 period, when Jayalaithaa was serving her third term as Chief Minister, Tamil Nadu’s industrial economy grew by a mere 2.1 per cent a year, against 5 per cent a year growth in Gujarat and Haryana.

This decreased focus on attracting investments and aiding industries manifest itself in the State’s slide in the ranking of ease of doing business. From the 12th rank in 2015, it slipped to 18th position in 2016, according to the Ministry of Commerce and Industry rankings in association with the World Bank.

Interestingly, however, Tamil Nadu is the only State (besides Gujarat) to clock 9 per cent plus growth during the eight-year period from 2005-06 to 2012-13. However, the credit for that goes as much to the DMK, which was in power from 2006 to 2011, as to the AIADMK.

Social development

Tamil Nadu’s growth story seems more about quality: it managed better developmental scores, even with lower economic growth rates. The State’s GDP growth rate was lower during both the tenures of Jayalalithaa (2001-2006 and 2011-2016), as compared to its peers.

But on the indices of human development – be it education, health, poverty, female literacy or otherwise – Tamil Nadu fared better than most States. According to the 2013 Raghuram Rajan Committee report, which mapped the underdevelopment index based on 10 parameters, Tamil Nadu had an index score of 0.34, against 0.35 for Maharashtra and 0.49 for Gujarat. (The lower the index score, the better is the State’s development.)

Social spending by the Jayalalithaa government was much higher in her second tenure than in her third. It averaged 35 per cent of overall disbursement during 2001-2006, the highest among high-income States.

Fiscal prudence

Measures of fiscal prudence and deficit control also improved in the later years of Jayalalithaa’s time in office. During the 2001-2006 period, Tamil Nadu had a debt-to-GDP ratio of 26 per cent, the lowest among high-income States; Gujarat had a higher ratio of 35 per cent. By 2011-14, Tamil Nadu had lowered that ratio to 20 per cent, against 25 per cent for Gujarat.

And the State’s fiscal deficit to GDP, which averaged 2.9 per cent of GDP, was lower than the 3.5 per cent GDP growth it clocked during the 2001-06 period. However, it slipped in its rankings, with Gujarat and Maharashtra managing lower fiscal deficit figures than Tamil Nadu.