Pardon me for this very linear thought process. This is about TN's tryst with manufacturing and the what I think should be the path ahead. Comes from many discussions with @VinTN @CkAkash77 and others and also from my reading of the political rhetoric in TN over last decade. (1)
TN has been doing well in terms of manufacturing for quite a long time. From the days of spinning mills in Kovai, Tirupur and the auto ancillaries in Padi and small machine shops in Ambattur to hosting manufacturing plants automotive behemoths over the past 30 years (2)
TN's economic growth has been solidly grounded on manufacturing taking advantage of the shoots of tier-1 suppliers, the entrepreneurial skills of the different regions, stable manufacturing policy regimes of successive governments & the port infrastructure that was available (3)
This made a huge difference in the way the economic growth translated in terms of opportunities. Coupled with excellent transport infrastructure cris-crossing the state, the growth was more broad based & brought up a new lower middle class that consists of shop floor workers (4)
This has led to a less skewed cost of living differential between Chennai city and the tier-2 tier-3 cities and towns in TN. This on an absolute scale increased the cost of living in towns as the new middle class invested back in their towns and villages (5)
and engineers with a bachelors degree in varied streams. This has in overall accelerated the migration of a significant number of people from primary sector in their villages to the manufacturing sector. What this has also done was to geographically broad based the growth (6)
Now that an entire generation has realized this growth and more people from tier-2 and tier-3 towns moved abroad and brought back money, the wages of TN increased across the state across sectors. This is what Raghuram Rajan famously talks of as Balassah Sameulson effect. (7)
This has led to two very distinct factors that I'd like to talk about here. One, the nature of Chennai's economy landscape and two the nature of TN's overall labour market.
Chennai having seen an explosion go automotive manufacturing growth over the past two decades has (8)
earned the tag of Detroit of Asia. Although TN did tag along the IT revolution of 90s and 2000s, it never really focused on the IT sector as much as it did with the manufacturing sector. Sector specific policies came out. But Bangalore, Hyd, Pune and Gurgaon raced ahead (9)
This meant that the white collar high disposable income population did not grow as high in Chennai as it did in the other places. It also had to do with the weather, the local pop culture, the govt policies and a reputation for language chauvinism. (10).
In consequence what saw Bangalore and Hyd grow as the Silicon Valley of India with white collar executives shuttling between the original and the name sake across the two continents was not nearly as seen for Chennai and both the cities raced ahead in related indices. (11)
The new greenfield airports came up and the traffic of both these cities raced ahead while Chennai started lagging behind. An exponential growth in the real estate sector in Bangalore didn't prevent it in continuing to be the first choice of setting up back offices & engg centers
if foreign OEMs and the go to place for startups and VCs. This did indeed skew the state's growth indices but who cares. Bangalore is welcoming to all, has a good night life, open to the world and a good weather and English speaking working class. (13)
Chennai in the mean time has long lost the race. What used to be the 4th largest Metro is now 5th or 6th in terms of air traffic, displaced from 3rd by Blr in terms of cargo traffic and not exactly a first choice for the young from across India. (14)
Could Chennai end up going the Detroit way? Where when a new revolution sweeps manufacturing in terms of automation and decentralization and deglobalization leads to lesser jobs the city could fall back? No one knows. It is also not prudent to use the same policies even (15)
after the possible objectives of a robust manufacturing policies has been achieved. An entire generation across, castes, class and regions have moved from primary to mfg sector without many having to get into cheap labour across India. Cheap labour abroad too is high value (16)
It is hence, I believe time for TN to move its focus away from manufacturing push more and more towards high value sectors. Let the existing manufacturing hub flourish. But it is high time to diversify and move up the value chain. It is time for the new manufacturing to (17)
the gangetic plains. It is the gangetic plains with high density population and low growth that needs these labour intensive jobs now. UP, Bihar, Madhya Pradesh, and even mining and engg states like Jharkhand, Chattisgarh need more and more industrial cities and rapid growth (18)
It is time for TN to embrace white collar jobs for the next generation of growth. Still focusing on new age manufacturing is a redundant and an idea of diminishing returns. Time to focus on R&D, financial sector, services, startups to cater to the next generation of workers (19)
It is the high cost of labour amongst Tamil people that has led to large number of migrant labour from Jharkhand Bihar UP Bengal to do low wage jobs. Hence it is also important for TN to accept these migrant labour with open arms and not see it as a demographic invasion (20)
It is time for TN to focus on the higher end of the wage scale at a state level. The govt will continue to find success in mfg related policies in new sectors like Semiconductors, EVs, etc. But it has to introspect if that is the path it wants to take. (21)
Part of the reason, the unscrupulous environmental activism that ground some projects in southern TN found resonance was because of this. The expectations even amongst tier - 3 towns was no more industrialization whatever others might say. (22)
TN shouldn't become a case of job done well half way but lost steam later. It is time to leave behind the sleeper express and build the High Speed train, figuratively and literally (23).
That is an important point. The TN Defence Corridor and focus on Madurai Tuticorin Kanyakumari belt should be pushed for this. In the mean time, the capital Chennai, needs a course correction. https://twitter.com/VinTN/status/1314212924265652227?s=20
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