Achieving One Trillion Dollar Economy for Tamil Nadu: Some Implications and Concerns

Abstract

This study examines whether Tamil Nadu’s economy will become a US $1 trillion economy by 2030, given its current slow growth regime, inflation, and rupee depreciation. Our analyses indicate that, assuming an inflation rate of 5% and 2% exchange rate depreciation per annum, the Tamil Nadu economy needs to grow at a real growth rate of 13.2% per annum for 8 consecutive years from 2023-24 to 2030-31 to reach the US $1 trillion target. Considering the growth contributions of sub sectors, this study simulates multiple growth strategies to achieve 9% overall growth, which would achieve the target in 2033-34. Further, it examines whether export promotion will help to achieve this target. Finally, it shows that the current level of debt-GSDP ratio is a hindrance to growth. It suggests that ensuring 14% nominal (i.e., 9% real) growth of economy, the state should target for a revenue surplus from 2023-24 onwards, such that it contains its fiscal deficit to only 2% level and obtains a sustainable threshold debt level of about 18% in 2034-35.