DMK@75 | How ‘Dravidian Model’ has shaped Tamil Nadu’s economy
As DMK marks its 75th anniversary, we examine how the Dravidian Model has helped Tamil Nadu strike a balance between economic growth and inclusive development
What sets apart the DMK’s “Dravidian Model” of development from Narendra Modi’s “Gujarat Model”? Providing equal opportunity for all, says former finance minister and current IT minister of Tamil Nadu Palanivel Thiaga Rajan. “That is the essence of the Dravidian Model,” he said.
Since the Stalin-led DMK government assumed power in Tamil Nadu in 2021, the party has championed the “Dravidian Model” of development. Thiaga Rajan, or PTR as he is popularly called, explained that it emphasises providing equal opportunities to all, ensuring that even those from less privileged backgrounds have a fair chance to succeed.
“When my driver’s son can attend the same school as my son, being a child of privilege, that signifies a successful outcome,” PTR dropped a politically loaded statement in an interview when he was finance minister.
While PTR’s statement might sound far-fetched, the impact of the Dravidian Model is undeniable in its significant influence on Tamil Nadu’s economic development. As the DMK marks its 75th anniversary today (September 17), The Federal examines how this economic model has shaped Tamil Nadu and its economy over the years.
Other development models
The “Kerala Model” was once celebrated for its impressive human development performance, reflected in its high human development index and per-capita indicators.
Andhra Pradesh, too, was recognised for its peak performance under Chandrababu Naidu, who had a specific vision of information technology-based economic growth. This vision was instrumental in the development of HITEC City, a major IT and business district in Hyderabad, which became a symbol of the state’s technological advancement and economic transformation.
Modi’s vision for Gujarat focused on rapid infrastructure and promoting capital-intensive sectors, creating a distinct model of growth.
Where Dravidian Model has succeeded
While top economists Jagdish Bhagwati and Arvind Panagariya, in their book Why Growth Matters: How Economic Growth in India Reduced Poverty and the Lessons for Other Developing Countries, advocated for a trickle-down approach aligned with Gujarat’s growth-centric model, Nobel laureate Amartya Sen and development economist Jean Drèze, in An Uncertain Glory: India and Its Contradictions, emphasized the need to balance growth with human development, citing Kerala’s success in healthcare and education.
This is where Tamil Nadu’s signature Dravidian Model comes into play, aiming to offer the best of both worlds.
Tamil Nadu’s GDP of $250-300 billion stood only below Maharashtra’s in 2023-2024, and the per-capita GDP of Rs 2,41,131 remained lower than Karnataka and Gujarat for the same period. However, the Dravidian Model is not merely a metric-based approach even though the state has set an ambitious target of reaching $1 trillion in GDP within 2030.
Synthesis of growth and development
“The Dravidian model represents a synthesis of both growth and development, suggesting that both can be achieved simultaneously,” explained economist Kalaiyarasan Arumugam, Assistant Professor at the Madras Institute of Development Studies, and Visiting Research Fellow, King’s College London.
“While Gujarat excels in growth indicators, it lags in healthcare and education. Kerala, conversely, has achieved remarkable success in these areas but struggles with economic growth, relying significantly on remittances for 30 per cent of its GDP,” he added.
“Tamil Nadu’s significant achievement has been its relative inclusivity, which reflects a broad-based, socially embedded approach to labour-intensive growth. The state has the calibre to go beyond the fixed target of $1 trillion but sustaining this model in the face of global changes poses a challenge,” Kalaiyarasan added.
Cluster-based approach
Tamil Nadu, touted as the most urbanised state is one among the front-runner states in terms of manufacturing and services sectors largely because of its unique cluster based approach ingrained in the state’s economic policy.
“The establishment of numerous industrial clusters such as Krishnagiri, Tirupur, Virudhunagar, and Sankagiri contrasts sharply with the more centralised models seen in states such as Maharashtra (dominated by Mumbai) and Gujarat (centred around Ahmedabad),” Kalaiyarasan explained.
The state is also shifting its focus towards emerging sectors such as electric vehicles (EVs), global capability centres (GCCs), and other advanced technologies. Not everything is merry and there are real challenges involved amid the evolving global value chain.
Sitting pretty in manufacturing realm
There’s a new trend emerging too, where northern states in India are increasingly offering substantial incentives to manufacturing firms in comparatively prosperous states such as Tamil Nadu, which rely heavily on cheap labour, to establish facilities there. But experts say there’s hardly anything for Tamil Nadu to worry about.
“Tamil Nadu doesn’t need to be overly concerned about low-value manufacturing jobs moving into other regions. As the state is relatively prosperous, it naturally transitions towards high-value manufacturing and services, mirroring global trends,” said Vidya Mahambare, columnist and Professor of Economics and Finance at Great Lakes Institute of Management.
“The arrival of global companies such as Apple underscores this shift and adds a sense of prestige to the state’s economic landscape,” she added.
However, Kalaiyarasan believes that small-scale industries in Tamil Nadu, which often add lower value to the economy, may struggle. “Sivakasi, a town around 80 km from Madurai, known for its cracker manufacturing, will be hit owing to the state’s shift towards high-end manufacturing. It will be crucial to see how the government addresses this issue, particularly in terms of upgrading technology and exploring alternative strategies for these industries,” he added.
A gap that needs to be bridged
Another challenge Kalaiyarasan points out is the gap between educational outcomes and industry requirements. “Despite a commendable gross enrolment ratio of 47 per cent in higher education, which surpasses the national average, a major issue is the mismatch between educational outcomes and industry needs. If graduates cannot find tangible outcomes from their education, it is no less a crisis,” he added.
The state is at a sweet spot but needs several policy-level changes to compete with the world. “While skill development across India often emphasises manufacturing, Tamil Nadu has a unique opportunity to excel in the services sector by efficiently equipping its youth with the right skills,” Mahambare suggested.
“The government must carefully consider which industries to incentivize, especially since many services are now digital and tradeable in ways they weren’t before. This strategic approach will help match industries with the skills of the workforce and foster a more balanced and effective economic growth,” she added.
Robust healthcare and medical tourism
The state also boasts a robust network of healthcare facilities, including government medical colleges, hospitals, and specialised centres. Tamil Nadu’s advancements in healthcare, both in terms of infrastructure and services, has in fact catapulted the state to become a medical tourism hub in India.
The state employs a large number of skilled medical professionals, including nearly 10,000 doctors and over 18,000 nurses, government data shows. The state has 36 government medical colleges, 64 government hospitals, 119 Comprehensive Emergency Obstetric and Newborn Centres, and numerous other specialised units and health centres.
“Tamil Nadu’s health indicators have improved dramatically, with reductions in maternal and infant mortality rates and high rates of immunisation coverage. The state’s Expanded Programme on Immunisation has achieved over 98 per cent coverage, and it has a strong track record in organ transplantation,” a senior official in Tamil Nadu Health department said.
“To address lifestyle diseases such as diabetes and hypertension, Tamil Nadu has introduced the ‘Makkalai Thedi Maruthuvam’ (MTM) programme, which emphasises home-based care and has improved access to treatment and follow-up services. The MTM programme has significantly increased the number of people screened for chronic conditions and has improved disease management outcomes,” the official added.
Fiscal management a major challenge
Despite notable progress in health and education, fiscal management continues to be a major challenge for Tamil Nadu. The state budget documents for 2024-25 indicate that fiscal deficit has exceeded the budgeted target for FY24 and is approaching the 3.5 per cent fiscal responsibility limit. The revenue deficit is estimated to be Rs 44,907 crore this year.
Furthermore, the state’s outstanding debt has surpassed Rs 8 lakh crore, approximately 28 per cent, significantly above the sustainable level of 20 per cent recommended by the new FRBM committee report. High borrowing costs, revenue shortfalls, and extensive welfare programs are certainly placing a burden on the state’s finances.
“To address the fiscal imbalance, it is crucial to reduce the fiscal deficit to 3 per cent and eliminate the revenue deficit. This can be achieved through increasing revenues by 0.75 per cent of GSDP and simultaneously reducing revenue expenditures by 0.75 per cent,” said KR Shanmugam, Director and Professor at Madras School of Economics.
“Alternatively, a more moderate strategy would involve increasing revenues by 0.25 per cent and reducing revenue expenditures by 0.25 per cent. Both approaches aim to improve fiscal health and decrease interest liabilities,” he added.
Balancing progress and social welfare
To sum up, Tamil Nadu’s progress stems from enduring efforts since the Kamaraj era, driven by strategic government policies and the Dravidian parties’ skilful negotiations with New Delhi to secure crucial projects. The state’s effective public distribution system, the mid-day meal scheme for school children, Amma Unavagam, government-sponsored health insurance, and the free colour TV scheme have played a pivotal role in shaping the state’s economy.
The balance Tamil Nadu has struck between economic growth and inclusive development as it continues to fight for its linguistic identity underscores the Dravidian model's success as a holistic economic model that addresses the needs of everyone within a highly unequal Indian society.