The possibilities and limits of the Tamil Nadu model

Hindustan Times

20 hours ago

Drawing attention to the sharp differences in incomes across developing countries, the Nobel-winning economist Robert Lucas had suggested that we should see these differences as possibilities. 'Is there some action a government of India could take that would lead the Indian economy to grow like Indonesia's or Egypt's?' Lucas wrote in an oft-cited 1988 paper (the Indian economy was considered a global developmental laggard then). 'If so, what, exactly? If not, what is it about the 'nature of India' that makes it so? The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think about anything else.'
Looking at the stark differences in incomes and human development indicators across Indian states, similar questions come to mind: Is there something that Uttar Pradesh could do to grow like Tamil Nadu or Maharashtra? If so, what exactly? If not, why not? Such questions have gained greater salience as inter-state disparities have widened in recent years.
Some economists and policy wonks seem to have found an ideal growth 'model' in the state of Tamil Nadu. With manufacturing accounting for a quarter of the state's economic output, Tamil Nadu is seen as a desi version of Vietnam. Former chief economic advisor Arvind Subramanian has argued that the Tamil Nadu model could be adopted by other states to improve their industrial performance. Venture capitalist-turned-philanthropist Ashish Dhawan has also made similar arguments, praising the role of the state government in hand-holding new investors.
Compared to other industrialised states such as Haryana or Maharashtra, Tamil Nadu has more impressive attainments in health and educational outcomes. That makes it more attractive as a developmental model compared to either Kerala (which lacks a modern industrial base) or Gujarat (which has relatively poorer human development outcomes), economist Pranab Bardhan has argued.
What lies behind Tamil Nadu's developmental success? A part of the answer lies in the unique political economy of the state. The two major Dravidian parties share a common heritage and have adopted similar policy positions on key socio-economic issues. Both parties were born out of an anti-Brahminical movement going back to the British Raj, and have sought to empower the intermediate castes (OBCs). As some of these communities transitioned from traditional farm-based activities to modern businesses, they received bipartisan support from the state's politicians. Entrepreneurs were never seen as 'class enemies' to begin with, and continue to enjoy greater social legitimacy than in many other parts of the country.
Dravidian ideologues advocated industrialisation and modernisation of the economy so that Tamil society could break free from the shackles of caste-based occupations and hierarchical traditions, economists Kalaiyarasan A and Vijayabaskar M wrote in their 2021 book, The Dravidian Model. The Dravidian ideologues envisioned a democratisation of capitalist activities, and promoted the interests of local businessmen, the duo argue. The pro-business tilt in the state's policy stance has endured despite a series of corruption scandals over the past three decades.
Any state-level policymaker who wishes to emulate the Tamil Nadu model must also note its limits. Over the past decade, Tamil Nadu's share in manufacturing employment has declined even as those of other states have increased. While the organised manufacturing sector has grown rapidly, the unorganised sector seems to have languished. Since the unorganised sector employs more people, the gains in employment have been much less impressive than the gains in manufacturing output.
Second, despite the state government's significant investments in health and education, a growing section of the state's population has been turning to private educational and health care providers in search of better quality, as Kalaiyarasan and Vijayabaskar note.
Third, the state government's OBC-friendly tilt in social policies seem to have benefited some sub-castes (or jatis) much more than others. For instance, in 2007, Tamil Nadu abolished the common entrance test (CET) for admissions to professional courses since it was deemed to favour socially privileged communities (who could afford private coaching). While the move helped widen access to technical education, it is the better-off communities within OBCs that gained most, a 2019 analysis by R Srinivasan and N Raghunath showed.
Despite these limitations, Tamil Nadu's track record in delivering inclusive growth remains better than most other states. The southern state offers useful lessons for other regions.
However, it may not be easy to replicate the Dravidian model in toto, since that model rests on an unique demographic endowment. Most Tamils belong to lower caste groups and hence it has been relatively easy to build a consensus in favour of egalitarian policies in the state. Upper castes account for only 2% of Tamil Nadu's population according to the last National Family Health Survey.
In states such as Uttar Pradesh — where upper castes account for nearly a fourth of the population — the Dravidian model may not be easy to implement. Yet, if Uttar Pradesh were to achieve a (Tamil Nadu-style) political consensus on socio-economic reforms, it will find it easier to generate inclusive growth.
Pramit Bhattacharya is a Chennai-based journalist. The views expressed are personal.