2.

STATE INCOME
The overall growth rate achieved in the Tenth Plan proved that the State economy would sustain its performance in the long run also. However, the robust growth rates achieved during the years 2004-05, 2005-06 and 2006-07 could not be sustained in the first two years of the Eleventh Plan Period (2007-08 and 2008-09) due to some adverse shocks, realized by the State economy. During these two years, almost all the sectors viz. primary, secondary and services witnessed a lowest growth profile. Primary sector witnessed a negative growth whereas the secondary and services sectors experienced a deceleration in their performances. Growth Performance: Gross State Domestic Product (GSDP): 2008-09: The overall growth performance GSDP : 1999-00 Prices (Rs. in Crores) of the State economy is measured by the Gross State Domestic Product(GSDP) at 250000 constant prices. The GSDP at factor cost 200000 at constant (1999-2000) prices in the 150000 State increased from Rs.218538 crore in 2007-08 to Rs.228479 crore in 2008-09 100000 registering a growth of 4.55 per cent 50000 which is negligibly higher than that of 0 4.41 per cent achieved in the preceding 2004-05 2005-06 2006-07 2007-08 2008-09 year. Whereas the GSDP, at current prices had increased from Rs.304989 crore in 2007-08 to Rs.339212 crore in 2008-09, registering a robust growth of 11.22 per cent. In real terms, the State was able to achieve a commendable growth of 11.45 per cent in 2004-05, 11.89 per cent in 2005-06 and 11.29 per cent in 2006-07. However, the State could not maintain the same tempo of growth in the succeeding years. The negative growth rate of 6.81 per cent in the primary sector during 2007-08 and moderate growth rate of 2.25 per cent in the secondary sector and decelerated growth rate in the services sector were the limiting factors for fall in the overall performance of the State economy during 2007-08. During 2008-09 also, all the three sub sectors had experienced a low growth profile when compared to the growth of previous year 2007-08. The State economy during 2008-09 witnessed a low growth rate of 1 per cent in the secondary sector and 7.62 per cent in the services sector, which decelerated by 2.25 percentage points achieved in 2007-08. The primary sector witnessed a negative growth of 1.92 per cent during 2008-09, which was condensed from the previous years negative growth of 6.81 per cent and it is a brief relief for the primary sector.
168085 188076 209302 218538 228479

13

Table 1: Sectoral Growth of Gross State Domestic Product at Factor Cost Tamil Nadu (1999-2000 New Series)
(Rs. Crore) Year Primary Income Growth Rate (%) 19236 (-)19.68 18971 22227 24675 27793 (-)1.38 17.16 11.01 12.64 At Constant (1999-2000) Prices Secondary Tertiary Income Growth Income Growth Rate Rate (%) (%) 41674 9.90 81385 4.38 44438 49750 57126 62527 6.63 11.95 14.83 9.45 87406 96107 106275 118982 7.40 9.95 10.58 11.96 GSDP Income Growth Rate (%) 142295 1.75 150815 168085 188076 209302 5.99 11.45 11.89 11.29

2002-03 2003-04 2004-05 2005-06 2006-07 (RE) 200708(QE) 200809(AE)

25899

(-)6.81

63936

2.25

128703

8.17

218538

4.41

25401

(-)1.92

64572

1.00

138506

7.62

228479

4.55

At Current Prices 2002-03 2003-04 2004-05 2005-06 200607(RE) 200708(QE) 200809(RE) Note: RE-Revised Estimates, QE - Quick Estimates; AE - Advanced Estimates. Source: Directorate of Economics and Statistics, Chennai - 6. 42998 (-)1.05 103843 9.88 192371 15.17 339212 11.22 43454 10.16 94510 9.20 167025 10.67 304989 10.14 20927 21584 26905 32463 39447 (-)15.17 3.14 24.65 20.65 21.51 45796 51510 61544 74399 86546 13.80 12.48 19.36 20.09 16.32 91432 102277 113924 127975 150924 8.91 11.86 11.39 12.33 17.93 158155 175371 202374 234837 276917 6.24 10.89 15.40 16.04 17.92

National Income Vs State Income: At the National level, the Central Statistical Organisation (CSO) estimated that the Gross Domestic Product (GDP) at factor cost and at constant prices (1999-2000), would increase from Rs.3129717 crore in 2007-08 to Rs.3339375 crore in 2008-09 registering a growth of 6.70 per cent, which is higher than the growth performance achieved by the State (4.55%) for the corresponding period. However, at the national level also, the growth rate of GDP at 6.70 per cent in real terms during 2008-09 decelerated from 9.01 per cent of growth rate achieved in the previous year. The CSO had downward the revision in the GDP growth than anticipated mainly on account of witnessing lower performances in almost all the sub sectors except construction and community, social and personal services.

14

Table-2 : State Income Vs. National Income :Growth Rates

(Rs. Crore)

Year 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Tamil Nadu At Current At Constant Prices Prices 158155 (6.24) 142295 (1.75) 175371 (10.89) 150815 (5.99) 202374 (15.40) 168085 (11.45) 234837 (16.04) 188076 (11.89) 276917 (17.92) 209302 (11.29) 304989 (10.14) 218538 (4.41) 339212 (11.22) 228479 (4.55)

All India At Current At Constant Prices Prices 2261415 (7.80) 2048286 (3.84) 2538170 (12.24) 2222758 (8.52) 287770 (13.38) 2388768 (7.47) 3282385 (14.06) 2616101 (9.52) 3779385 (15.14) 2871118 (9.75) 4320892 (14.33) 3129717 (9.01) 4933183 (14.17) 3339375 (6.70)

Note: Figures in brackets are Growth Rates for corresponding period. Source: Directorate of Economics and Statistics, Chennai &. CSO, New Delhi.

Economic Slowdown: The Ratchet Growth both at national and State levels could not be sustained during 2007-08 and 2008-09 due to fall in agricultural income and worldwide Economic Slowdown since October 2008. The meltdown in the financial sector in USA spread to European and to Asian countries had resulted in the Economic Slowdown in the international markets. The Global Liquidity Crunch had affected the Indian economy also. The origin and dimension of crisis in the developed countries termed as worst since the Great Depression affected the developing countries in varying degrees including India. The increasing cost of production due to increasing raw material costs, power interruptions not only lowered down the production of export goods like textiles, engineering goods but also led to massive job losses in the country. The Indian rupee depreciated sharply vis--vis the US dollar since April 2008, which had affected the export prospects on Indian industries. The positive impact of the rupee depreciation had been washed away due to recession around the world especially in USA, European Union, Japan and Korea. The State was not exceptional from the effects of Global Slowdown Overview of Earlier Slow Down in Growths in Tamil Nadu : It may be useful to compare the slowdown in growth experienced in 2008-09 with that of earlier slowdowns in 1991-92, 1997-98 and 2002-03. The earlier slowdowns in growths of GSDP at factor cost were the sharpest in 1991-92 and 2002-03 than 1997-98. The GSDP of agriculture and allied activities decelerated from 11.42 per cent in 1991-92 to 9.79 per cent in 1997-98 and witnessed negative growth rates during 2002-03 and 2008-09. The growth rate of manufacturing GSDP was better in 2008-09 slowdown period when compared to negative growth witnessed during 1991-92 and 1997-98 barring 2002-03.
Table -3: Growth of GSDP and Select Sectors - Tamil Nadu Parameters GSDP (at Factor Cost) GSDP (Agriculture & Allied Activities) GSDP (Manufacturing) 1991-92 2.95 11.42 (-) 7.44 1997-98 8.20 9.79 (-) 1.42 2002-03 1.75 (-) 23.17 3.83 (Per cent) 2008-09 4.55 (-) 2.65 1.97

Source: Various Issues of Tamil Nadu Economic Appraisals.

15

Eleventh Five -Year Plan: Objectives: `The broad objective of the Eleventh Plan is to achieve steady and sustainable growth of the economy, coupled with social justice. Safeguarding the livelihood of the people through providing adequate educational and employment opportunities is a major thrust area for the Eleventh Plan. In addition, the Eleventh Plan aims to upgrade the quality of life of the urban and rural population by providing essential infrastructure, thereby ensuring and enhancing the delivery of basic civic services such as water supply and sanitation. The State has adopted a targeted overall growth rate of 9 per cent on par with the recommendations of the National Development Council for the Indian economy. (Eleventh Five-Year Plan Document , 2007-12) Strategies: The strategies for the Eleventh Plan are drawn up based on past development experience in the backdrop of the prevailing economic environment in the country and particularly in the State. The public expenditure during the Eleventh Plan periods aims at facilitating the achievement of the objectives with focus on revival of the primary sector, improvement of civic amenities, training for skill development and employment generation. The main philosophy of the Eleventh Plan is Inclusive Growth, which brings the vulnerable and marginalized groups within the Social Security Net. Private sector is to be made an effective partner in the States economic progress with its investments being channelised towards the priority sectors, where they are economically productive and socially relevant. (Eleventh Five -Year Plan Doucment 2007-12) Mid Term Appraisal of Eleventh Plan (2007-2009): During the Mid Term Eleventh Tam il Nadu - Eleventh Plan : Targeted Vs Annual Average Grow th Rates (2007-09) Plan Periods viz. 2007-08 and 2008-09, 12 . 0 10 . 1 the overall growth of the State 9 .2 10 . 0 9 .0 7.9 Economy is registered at 6.09 per cent 8 .0 6 .1 as against the overall target growth of 9 6 .0 4 .0 per cent per annum. On an average, the 4 .0 1. 6 State economy has to grow at a rate of 2 .0 0 .0 13 per cent per annum in the remaining Pr i mar y Seco nd ar y T er t i ar y O ver al l - 2 .0 three years so as to witness the target - 4 .0 growth of 9 per cent in the Eleventh - 4 .4 - 6 .0 Plan period. The primary sector posted Target Grow th Annual Average Grow th a negative growth of 4.37 per cent against the target growth of 4.0 per cent per annum in the mid term period while both secondary (1.63%) and services sector (7.90%) experienced lower growth rates against the respective target growth rates of 9.2 per cent and 10.1 per cent.

16

Table-4: Tenth Five Year Plan - Sectoral and Sub-Sectoral Target Growth Rates and Annual Growth Rates - Tamil Nadu
Tenth Plan (2002-07) Sector Projected Growth Annual Average Growth Rate Achieved 1. Primary Sector Agriculture and Allied Activities Forestry and Logging Fishing Mining and quarrying 2. Secondary Sector Manufacturing -Registered Un- Registered Electricity, Gas and Water Supply Construction 3. Tertiary Sector Trade, Hotels and Restaurants Transport, Storage & Communications Railways Transport by other means Storage Communication Banking and Insurance Real Estate ownership of Business Services Community, Social & Personal Services Public Administration Other Services Overall GSDP 10.00 9.50 8.00 2.02 5.65 7.59 9.00 9.11 8.66 6.09 12.0 14.05 6.00 10.00 2.00 11.15 14.00 9.30 5.73 6.37 3.37 16.91 11.41 8.22 10.5 4.3 5.5 4.5 19.3 7.14 5.44 0.69 19.48 6.94 4.74 10.50 9.77 6.50 11.93 8.03 8.85 8.5 10.1 7.7 11.5 2.77 7.90 7.00 11.31 3.00 1.50 0.40 7.12 8.00 2.50 6.00 0.75 4.46 6.66 9.10 8.89 7.31 11.87 9.9 5.7 3.35 (-)41.89 0.6 1.5 2.0 9.2 1.00 (-)2.50 1.15 1.63 3.79 4.00 4.02 4.37 4.0 4.0 Eleventh Plan (2007-12) Target Growth Rate Annual Average Growth (2007-09) (-)4.37 (-)4.94

Source: 1. Tenth Five Year Plan - Tamil Nadu State Planning Commission. 2. Directorate of Economics and Statistics, Chennai

17

Box-1 Inclusive Growth National and State economy have registered an annual growth rate of 9 per cent in the recent years. However, it is witnessed that the economic benefits achieved in the subsequent plans have not fully reached out to the target groups. Growth without adequate employment, lack of food security, increasing poverty, imbalanced regional development etc. are the continuing problems. To overcome the lop-sided development, the present 11th Five Year Plan focuses on achieving of Inclusive Economic Development. The Economic inclusiveness implies excluding nobody but involving everybody in the growth process. The essence of economic inclusive growth is that it aims at putting more people in productive and sustainable jobs. The Eleventh Plan Approach Paper has the title, Towards Faster and More Inclusive Growth. It revealed a strategy that aims at creating physical assets, human capital and capabilities and opportunities for productive employment, especially for the lower middle class and the poor, will help in achieving sustainable and inclusive growth. Economic Reforms in India since 1991 and acceleration in the globalization process in the recent years have created new political classes and changed the policy space.
Enhanced Public and Private Investment

Per Capita Income: Tamil Nadu vis--vis All Revitalising Farm Sector India:
Corporate Social Responsibility, Encompassing Creation of Social Capital, Economic Capital, Intellectual Capitaland Religious Capital Augmentation of Social Consumption viz. Education, Health and Nutrition and Sanitation Application of the State of the Art, Technology and Telesis in Production Process Environmental Sustainability Global Public Goods Adoption of a Multi-Stakeholder Approach in Eradicating Social and Economic Problems Financial Inclusion Effective Delivery Mechanism Bridging Rural-Urban Divides and Ensuring Balanced Regional Development Focus on Empowerment of Weaker, Underpriveleged Sections of the Population and Gender Equity

Development-minded Political Economy

Ingredients of Inclusive Economic Development

Reduction in the Incidence of Poverty and Unemployment Nurturing Infrastructure especially Rural Physical Infrastructure Holistic and Proactive Monetary and Fiscal Policy Measures

Source: Anatomy of Research Design in Economics, S.MANICKAM.(Former DD, E&AR Dept.,Chennai-108.)

18

There are seven key components in the Strategy of Inclusive Growth Viz. Stepping up investment in rural areas and agriculture; Increasing credit availability of farmers; Increasing public spending on education, health care and strengthening the mid-day meal scheme; Investing in urban renewal; Empowering the SC and ST and other backward classes, minorities, women and children, socially and economically and educationally; and Ensuring that through public investment in the growth process spreads to backward regions and districts. The Strategy of Inclusive Growth combines empowerment with entitlement and investment. Education empowers, improved health care empowers, employment guarantee entitles and fulfilling quota confers entitlements. Conferring entitlement, ensuring empowerment and stepping investment are considered as a winning combination. The new elements of the new architecture of Inclusive Growth are, Bharat Nirman; Mahatma Gandhi Rural Employment Guarantee Scheme; The Rural Health Mission; The Strengthened and extended Sarva Shiksha Abhiyan; The Mid-day Meal and ICDS Programmes; and The Jawaharlal Nehru National Urban Renewal Mission The Inclusive Growth strategy aims at including the excluded. To attain the goal of Inclusive Economic Development, multi-stakeholders of the economy such as Government, NGOs, Public Private Partnership and in the rural areas, the tribal and the vulnerable sectors must be equal participants in the development process.
Source: Abstract from Inclusive Economic Growth An Emerging Economic Philosophy (S.Manickam Former DD DEAR).

Per capita Income: Tamil Nadu vis--vis All India:

Per capita Incom e - Tam il Nadu: 1999-2000 The standard of living of the Prices (in Rupees) people is reflected through the per capita income earned by them in the respective 35000 30000 year. In the State, the per capita income in 25000 real terms increased from Rs.29445/- in 20000 2007-08 to Rs.30652/- in 2008-09 and 15000 registered a growth of 4.10 per cent, which 10000 is marginally higher than 3.97 per cent 5000 recorded in the previous year. But, 0 however, the growth rate is decelerated 2004-05 2005-06 2006-07 2007-08 2008-09 from 11.24 per cent achieved in 2005-06. It is noted that at National level, the per capita income both at current and constant prices is comparatively lower than at the State level. All India per capita income increased from 22975 25558 28320 29445 30652

19

Rs.24295/- in 2007-08 to Rs.25474/- in real terms and recorded a growth of 4.94 per cent which decelerated from 7.60 per cent achieved in 2007-08. However, it is noticed that during the first two years of the Eleventh Plan period, in real terms, the Annual Average Growth Rate of State per capita income is 4.04 per cent which is lower than 6.27 per cent at national level.
Table 5 : Per Capita Income (1999-2000 Series) Tamil Nadu At Current At Constant Prices Prices
Income
(Rupees)

Year

All- India At Current At Constant Prices Prices

Income
(Rupees)

Growth Rate (%)

Income
(Rupees)

Growth Rate (%)

Growth Rate (%)

Income
(Rupees)

Growth Rate (%)

2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Eleventh Plan Period AAGR

21830 24087 27512 31663 37190 40757 45058

4.24 10.34 14.22 15.09 17.46 9.59 10.55 10.07

19662 20707 22975 25558 28320 29445 30652

(-)0.44 5.31 10.95 11.24 10.81 3.97 4.10 4.04

18885 20871 23198 26003 29524 33283 37490

6.20 10.52 11.15 12.09 13.54 12.73 12.64 12.69

17109 18301 19331 20868 22580 24295 25494

2.03 6.97 5.63 7.95 8.20 7.60 4.94 6.27

Source: 1. Directorate of Economics and Statistics, Chennai 6. 2. Central Statistical Organisation, New Delhi.

Sectoral Performance: Primary Sector: The overall performance of the primary sector during 2008-09 did not fare well as it recorded a negative growth of 1.92 per cent. At constant prices, the GSDP of primary sector decreased from Rs.25899 crore in 2007-08 to Rs.25401 crore in 2008-09. The agriculture and allied activities, which is contributing about 85 per cent to total GSDP of primary sector, did not perform well during 2008-09. The income from this sub-sector decelerated from Rs.22116 crore in 2007-08 to Rs.21530 crore in 2008-09 and thereby registered a negative growth of 2.65 per cent. However, the negative growth in this sub group in 2008-09 has been reduced when compared to 2007-08. Income originated from the fishing sub-sector is substantially high after Tsunami (December 2004), which witnessed a negative growth of 2.91 per cent in 2008-09 when compared to 40.30 per cent in 2005-06. However, the other two sub-sectors, viz. forestry and logging (1.16%), and mining and quarrying (1.81%) registered positive growths which had helped in narrowing down the overall negative growth of primary sector during the review period.

20

Table 6 : Primary Sector : Growth Rate of Sub-Sectoral Income (GSDP) at Constant (1999-2000) Prices - State Economy
Sub-Sector 2002-03 2003-04 2004-05 2005-06 2006-07 (RE) 23837 (14.65) 596 (-5.70) 2007-08 (QE) (Rs. Crore) 2008-09 XI Plan (AE) (200709) 22116 21530 (-7.22) (-2.65) (-) 4.94 601 (0.84) 608 (1.16) 2194 (-2.91) 1069 (1.81) 25401 (-1.92)

Agriculture & Allied Activities Forestry & Logging Fishing

15844 (-23.17) 633 (11.44)

15485 (-2.27) 599 (-5.37)

18971 (22.51) 629 (5.01)

20791 (9.59) 632 (0.48)

1.00 (-)2.50 1.15 (-) 4.37)

1949 1895 1618 2270 2315 2312 (-2.60) (-2.77) (-14.62) (40.30) (1.98) (-7.90) 809 991 1009 982 1045 1050 Mining & (6.73) (22.50) (1.82) (-2.68) (6.42) (0.48) Quarrying Primary 19236 18971 22227 24675 27793 25899 Sector (-19.68) (-1.38) (17.16) (11.01) (12.64) (-6.81) Note: 1.Figures in brackets indicate percentage change over the previous year. 2. RE - Revised Estimates, QE - Quick Estimates, AE - Advanced Estimates. Source: Directorate of Economics and Statistics, Chennai-6.

Secondary Sector: The GSDP in the secondary sector had increased from Rs.63936 crore in 2007-08 to Rs.64572 crore in 2008-09 and thereby registered a meager growth of 1 per cent which decelerated from 2.25 per cent recorded in the preceding year. The main contributor of this sector viz. manufacturing sub-group heavily suffered from `Global Recession. The manufacturing industries such as textiles, readymade garment apparels, leather and wood products, publishing and printing materials, coke and petroleum products, chemical products, basic metals, non metallic mineral products, computing machineries and communication equipments have declined sharply in their production which had pulled down the overall GSDP in this sub-group. The export orders of these products were either cancelled or reduced considerably due to World Recession. The manufacturing unregistered industries also reduced their production due to lower demand from the registered manufacturing industries. The survivals of unregistered manufacturing industries depend on the larger industries whose export was declined due to Global Financial Crunch. During 2008-09, the gross domestic product of `electricity, gas and water supply is almost halved when compared to the previous year. It declined from Rs.1744 crore in 2007-08 to Rs.902 crore in 2008-09 and recorded an astonished negative growth of 48.27 per cent due to increasing cost of production of electricity and gas and lower revenue realized and involvement of subsidy. The growth rates achieved by the construction industries during 2004-05, 2005-06 and 2006-07 could not be sustained during 2007-08 and 2008-09. The construction subgroup is not free from the economic slow down. Though this sub group registered an accelerated growth of 3.36 per cent in 2008-09 compared to the previous year could not help the secondary sector to boost up the overall growth.

21

Table 7 : Secondary Sector : Growth Rate of Sub-Sectoral Income (GSDP) at Constant (1999-2000) Prices State Economy
Sub-Sector 2002-03 2003-04 2004-05 2005-06 2006-07 (RE) 41913 (11.34) 28377 (11.44) 13536 (11.12) 2704 (-10.23) 2007-08 (QE) 43894 (4.73) 29523 (4.04) 14371 (6.32) 1744 (-35.50) (Rs. Crore) 2008-09 XI Plan (AE) (2007-09) 44758 (1.97) 3.35 30104 (1.97) 3.01 14654 (1.83) 4.08 902 (-48.27) (-)41.89

26968 30055 32327 37644 Manu(3.83) (11.45) (7.56) (16.45) facturing 16891 19559 20980 25463 Manu. (2.78) (15.80) (7.27) (21.37) Registered 10077 10496 11347 12181 Manu.Un(5.64) (4.16) (8.11) (7.35) registered 3872 2768 3098 3012 Electricity, (85.17) (-28.51) (11.92) (-2.78) Gas & Water Supply 10834 11615 14324 16470 17909 18298 18912 Construc(9.93) (7.21) (23.32) (14.98) (8.74) (2.17) (3.36) tion Secondary 41674 44438 49750 57126 62527 63936 64572 Sector (9.90) (6.63) (11.95) (14.83) (9.45) (2.25) (1.00) Note: 1. Figures in brackets indicate percentage change over the previous year. 2. RE - Revised Estimates, QE - Quick Estimates, AE - Advanced Estimates. Source: Directorate of Economics and Statistics, Chennai-6.

2.77 1.63

Services Sector:
Tamil Nadu - Sectoral Growth Rates in GSDP (1999-2000 Prices) The overall GSDP of the Services Sector increased from 15 Rs.128703 crore in 2007-08 to 10 Rs.138506 crore in 2008-09 and 5 witnessed a growth of 7.62 per cent, 0 which, decelerated from 8.17 per cent -5 achieved in the previous year. Almost -10 2006-07 2007-08 2008-09 all the sub-groups of this sector 12.64 -6.81 -1.92 Prim ary registered a positive growth during 9.45 2.25 1.00 Secondary 2008-09, except storage, which showed 11.96 8.17 7.62 Tertiary a negative growth of 0.90 per cent though negligible. All the broad sub-groups in this sector viz. `trade, hotels and restaurants, `transport, storage and communication and `financing, insurance, real estates and business services registered positive growths however, they are witnessing the deceleration in their growth during the review year.

Trade, hotels & restaurants which is directly linked with tourism had heavily decelerated in its growth from 10.80 per cent achieved in 2007-08 to 3.20 per cent in 2008-09. The Global Economic Slowdown affected the international and domestic tourist arrivals in the State which in turn reduced the revenue of this sub sector considerably. It is noted that the growth rates of real estate sub-sector had continuously decelerated from 12 per cent in 2004-05 to 2.84 per cent in 2008-09. The real estate business had also experienced a lower demand from the commercial and residential buyers due to low purchasing power and high bank rates. However, the communication sub sector is not affected by the economic slowdown and is flourishing well in the State owing to alarming increase in the number of mobile users and lower user charges competitively imposed by the service providers.

22

Banking and insurance sub sector realized a growth of 6.25 per cent. Community, Social and Personal Services is another sub-group of services sector which recorded a robust growth of 14.05 per cent during 2008-09 as compared to 3.51 per cent in 2007-08 on account of the implementation of Sixth Pay Commission in the State.
Table - 8: Tertiary Sector : Growth of Sub-Sectoral Income (GSDP) at Constant (1999-00) Prices - State Economy (Rs. Crore)
Sub-Sector 2002-03 200304 25423 (13.52) 16544 (13.24) 200405 28620 (12.58) 18437 (11.44) 200506 32591 (13.87) 20580 (11.62) 200607 (RE) 36666 (12.50) 22552 (9.58) 200708 (QE) 40625 (10.80) 25157 (11.56) 200809 (AE) 41925 (3.20) 27941 (11.06) XI Plan (2007-09) 7.00 11.31

1. Trade, Hotel & Restaurants 2.Transport, Storage & Communicatio n 2.1. Railways 2.2 .Transport by other means 2.3 Storage 2.4 Communication 3. Financing, Insurance, Real Estates & Business Services 3.1. Banking & Insurance 3.2. Real Estate, Ownership of Dwellings & Business Services 4. Community, Social & Personal Services 4.1.Public Administration 4.2.Other Services

22395 (1.97) 14610 (4.73)

1580 (0.83) 8325 (1.33) 77 (-12.75) 4629 (13.48) 22185 (10.54)

1640 (3.80) 9131 (9.68) 78 (1.30) 5695 (23.03) 23595 (6.36)

1800 (9.76) 10031 (9.86) 91 (16.67) 6515 (14.40) 24970 (5.83)

1894 (5.22) 10962 (9.28) 97 (6.59) 7627 (17.07) 28238 (13.09)

2065 (9.03) 11487 (4.79) 108 (11.34) 8893 (16.60) 32221 (14.11)

2194 (6.25) 12241 (6.57) 111 (2.28) 10612 (19.33) 34409 (6.79)

2370 (8.02) 12767 (4.30) 110 (-0.90) 12694 (19.62) 36123 (4.98)

7.14 5.44 0.69 19.48 5.89

11487 (16.08) 10699 (5.17)

12041 (4.82) 11554 (7.99)

12028 (-0.11) 12941 (12.00)

13969 (16.14) 14270 (10.27)

16779 (20.12) 15441 (8.21)

17942 (6.93) 16467 (6.64)

19189 (6.25) 16934 (2.84)

6.94 4.74

22195 (0.92)

21843 (-1.59)

24081 (10.25)

24866 (3.26)

27543 (10.77)

28511 (3.51)

32516 (14.05)

8.78

Tertiary Sector Note: 1. Figures in brackets indicate percentage change over the previous year. 2. RE - Revised Estimates, QE - Quick Estimates, AE - Advanced Estimates. Source: Directorate of Economics and Statistics, Chennai-6.

7348 (-7.07) 14847 (5.41) 81385 (4.38)

7469 (1.65) 14374 (-) 3.19 87406 (7.40)

7765 (3.96) 16315 (13.50) 96107 (9.95)

7847 (1.06) 17019 (4.32) 106275 (10.58)

9141 (16.49) 18403 (8.13) 118982 (11.96)

9199 (0.63) 19312 (4.94) 128703 (8.17)

10816 (17.58) 21700 (12.37) 138506 (7.62)

9.11 8.66 7.90

Structural Transformation: The structural transformation among the sectors is an indispensable characteristic feature in the development process of the State economy. It showed that the contribution of primary sector which was 43.51 per cent of total GSDP in 1960-61 decelerated continuously and reached 25.92 per cent in 1980-81 and further decelerated to 11.12 per cent in 2008-09 whereas the contribution of secondary sector increased from 20.27 per
23

cent in 1960-61 to 33.49 per cent in 1980-81 and then decelerated to 28.26 per cent in 2008-09 giving way to the services sector. The services sector is gaining momentum in the development process of the economy and its contribution had accelerated from 36.22 per cent in 1960-61 to 40.59 per cent in 1980-81 and then boomed at 60.62 per cent in 2008-09. The rapid growth of services sector is leapfrog from the primary sector skipping the middle of secondary sector in the State economy. Table-9: State Economy: Structural Changes
(Per cent)

Sl. Sectors No. 1. Primary Sector 2. Secondary Sector 3. Tertiary Sector Total

196061 43.51 20.27 36.22 100.00

197071 34.79 26.88 38.33 100.00

198081 25.92 33.49 40.59 100.00

199091 23.42 33.10 43.48 100.00

199900 17.37 29.57 53.06 100.00

200607 13.28 29.87 56.85 100.00

200809 11.12 28.26 60.62 100.00

Note: 1960-61 to 1990-91 computation is based on 1980-81 prices. 1999-00, 2006-07 and 2008-09 are based on 1999-2000 prices. Source: Department of Economics and Statistics, Chennai

Gross State Domestic Product and Per capita Income- Major States: The Compound Annual Growth Rates (CAGR) for the period from 1999-00 to 2007-08 in real terms for 15 major States representing nearly 90 per cent of population in the country was computed for the respective State Domestic Products with new base year (1999-2000) as per the data provided by the Central Statistical Organisation. The Gross State Domestic Product at constant prices in Tamil Nadu increased from Rs.134185 crore in 1999-2000 to Rs.228479 crore in 2008-09 which was fairly high in absolute value when compared to Haryana where it increased from Rs.51391 crore to Rs.112543 crore for the respective period. However, Haryana occupied the first position with an annual compound growth rate of 9.10 per cent whereas Tamil Nadu was ranked seventh with 6.09 per cent whereas it was 7.20 per cent at the national level. It is noted that the CAGR for Bihar (7.78%) and Orissa (6.93%) is higher than Tamil Nadu (6.09%). The World Bank cited three reasons viz. fiscal, infrastructure and human resources development for the existence of different rates of growth between the States. The per capita Net State Domestic Product (NSDP) in real terms also exhibits significant variations between the States. The highest per capita income is noticed in Haryana where it increased from Rs.23229/- in 1999-2000 to Rs.42267/- in 2008-09 with an Annual Compound Growth Rate of 6.88 per cent compared to 6.41 per cent in Andhra Pradesh. Whereas in Tamil Nadu, it increased from Rs.19432/- to Rs.30652/- which is higher than that of all India but registered a lower annual compound growth rate of 5.19 per cent. States like Gujarat (6.74%), Andhra Pradesh (6.41%), Kerala (6.81%), Orissa (5.39%), Uttar Pradesh (7.13%) had a higher growth rate in per capita income when compared to Tamil Nadu and other States. The disparity in the growth rate of per capita income between the States is due to differences in private investment and public expenditure, differences in the distribution of State Governments expenditure, State policies, implementation of welfare schemes, etc.

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Table - 10 : Gross State Domestic Product and Per Capita Income Major States (At 1999-2000 Prices)
State Andhra Pradesh Assam Bihar Gujarat* Haryana Karnataka Kerala* Madhya Pradesh* Maharashtra Orissa Punjab Rajasthan Tamil Nadu Uttar Pradesh West Bengal* All India GSDP (Rs. Crore) 1999-00 2008-09 CAGR 128797 252318 7.76 34833 50174 109861 51391 101247 69168 80132 247830 42910 67162 82720 134185 175159 135376 1786526 54477 98393 213674 112543 181338 126453 103503 416248 78410 103415 140523 228479 270850 220198 3339375 5.09 7.78 8.67 9.10 6.69 5.17 3.25 5.93 6.93 4.91 6.06 6.09 4.96 6.27 7.20 Per Capita Income (Rupees) 1999-00 2008-09 CAGR 15427 26983 6.41 12282 5786 18864 23229 17502 19461 12384 23011 10567 25631 13619 19432 13516 15888 15881 16597 9586 31780 42267 27385 32961 13299 33302 16945 33153 19079 30652 25114 23229 25494 3.40 5.77 6.74 6.88 5.10 6.81 0.90 4.19 5.39 2.90 3.82 5.19 7.13 4.86 5.40

Note * Up to 2007-08. Source: Central Statistical Organisation, New Delhi.

Gross Fixed Capital Formation (GFCF): GFCF is defined as the total value of additions to fixed assets during an accounting period. Normally, these are tangible assets, but sometimes they are intangible assets also, (eg.) intellectual property and software. The targets fixed for the Eleventh Five Year Plan were, a growth rate of 9 Per cent, an Incremental Capital Output Ratio (ICOR) of 3.6 per cent and a saving ratio of about 30 per cent of Gross State Domestic Product (GSDP). The savings are from three sources viz. households, corporate sectors and governments. The savings accrued from the Governments were very meager and inadequate. However, the functioning of Public Sector Undertakings in the State had resulted in earning profit, which increased their savings satisfactorily in the recent past. The savings from the household sectors were up to the mark, whereas the savings from the corporate sectors were not up to expectation. The share of GFCF in public sector increased from 33.90 per cent in 1999-2000 to 35.28 per cent in 2001-02 whereas the share of private sector had increased from 60.19 per cent to 64.72 per cent for the corresponding period. This trend was reversed during 2004-05 since the share of GFCF for public sector and private sector was in the ratio of 24:76 respectively.

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Table - 11: Gross State Domestic Product and Gross Fixed Capital Formation in Tamil Nadu (Value Rs. Lakh)
Year GSDP at Current Prices Gross Fixed Capital Formation ( Current Prices) Public Sector 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 13418520 14679594 14886119 15815525 17537080 20237357 732684 (33.90) 743834 (30.80) 878420 (35.28) 961795 (32.63) 1050263 (30.20) 976833 (24.37) Private Sector 1428835 (60.19) 1670951 (69.20) 1611095 (64.72) 1985564 (67.37) 2427206 (69.80) 3031754 (75.63) Total 2161519 2414785 2489515 2947359 3477469 4008587 16.12 16.45 16.72 18.64 19.83 19.81 Ratio of GFCF to GSDP

Note: Figures in brackets indicate percentage share to total. Sources: Department of Economics and Statistics, Chennai-6.

It was observed that, booming Foreign Direct Investment (FDI) into the State had established a new platform for the investment oriented growth in GSDP. Increase in investment in the industrial sector would increase the growth of fixed capital in the State so as to accelerate the overall growth rate in the planning process. In the State, the ratio of Gross Fixed Capital Formation to Gross State Domestic Product at current prices slowly increased from 16.12 per cent in 1999-2000 and reached 19.83 per cent in 2003-04 and then marginally declined to 19.81 per cent in 2004-05.

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