'We don't have to compete with Maharashtra or Gujarat. We have to now start thinking about how we compete with the United States or China.'
Tamil Nadu is the second largest contributor to India's gross domestic product and it is expected to be a key beneficiary of the so-called China plus one trade, getting investments from international manufacturers of electronics, automobiles, and consumer goods.
At a panel discussion on 'Redefining Manufacturing: The Power of Policy' during the Business Standard Tamil Nadu Round Table 2025 in Chennai on March 12, experts spoke about the sector's future in the state and the changes it is going through.
The panellists argued that Tamil Nadu should not compete with Indian states, but with the United States (US) and China to realise its ambition of being a knowledge economy.
Manufacturing contributed around 24 per cent of the Gross State Domestic Product (GSDP) in FY24.
The panel discussion comprised R Srinivasan, full-time member of the State Planning Commission; Gopala Krishnan C S, chief manufacturing officer of Hyundai Motor India; Brajesh Kumar Singh, executive director of Indian Bank; Mahesh Babu, chief executive officer of Switch Mobility; and Anil Jain, managing director of Refex Group.
One suggestion the panel had for the state was to promote research and development to create manufacturing products over the next decade.
Strengthening manufacturing
Tamil Nadu's urban infrastructure makes it attractive to global investors.
"Non-farm activity spread throughout the state even a thousand years ago. We found in the 2011 Census that, on average, a village in Tamil Nadu is hardly 10 km from a town. So, almost every village is as much a town in terms of the non-farm employment within that village itself," said Srinivasan.
The state will have to improve the share of labour in manufacturing.
"When it comes to the actual distribution of income that comes from this value addition of about 24 per cent of the GSDP, it is what worries us more. We have somewhere around 47 million people in the age group of 15 to 59, of which only around 3 million are employed in the organised sector within manufacturing. About 6-7 per cent of the working population creates about 24 per cent of our value addition. This creates a huge inequality in the system," said Srinivasan.
The state has around 45,000 factories, which is 15 per cent of the national share and the largest.
One-third of the country's textiles, 36 per cent of two-wheelers, 25 per cent of four-wheelers, and 40 percent of electric vehicles are manufactured in Tamil Nadu.
Refex executive Jain said India has distinguished itself in manufacturing but must change its thinking to compete internationally.
"The whole mindset has to shift 360 degrees in the country. I am not specifically talking about Tamil Nadu as a state. We don't have to compete with Maharashtra or Gujarat. We have to now start thinking about how we compete with the United States or China."
Babu, of Switch Mobility (the electric vehicles arm of Ashok Leyland), said Tamil Nadu has 17 per cent of engineers graduating in India annually: Talent is the state's advantage.
"The good thing in Tamil Nadu is we have software as well as good engineers available today. What I anticipate going forward is we will have to look at the labour codes and see how we can integrate software engineers into mechanical engineers' way of working.
"We are no longer behind either China, the US or Europe because we have embedded system engineers in India, good automobile industry designers in India, and we can create products and patents out of here," Babu said.
Making technology work
"We have been talking about developing IPRs [intellectual property rights] in the state, particularly in automobiles. I think we need to push it more because design, development and manufacture, and serving the world is the theme we need to look at rather than just manufacturing for the country or the state," Babu said.
Manufacturers will have to speed up the use of artificial intelligence (AI) and machine learning to improve production.
"AI can augment productivity and improve quality," said Hyundai India's Gopala Krishnan.
"Similarly, in maintenance, to reduce downtime, we have a dedicated IoT (Internet of Things) network. We are liberating data to control the entire plant. Through data analytics, if you're able to fetch parameters like torque, pressure, and current of the motors, you can identify potential failures and replace the parts upfront, reducing downtime," he said, explaining how his company's Chennai unit is adopting technology.
"We have been maintaining the capacity utilisation right from day one, above 90 per cent, and these kinds of technological solutions are really helping us to improve our efficiency in all verticals."
Singh, of Indian Bank, said India has to increase investments in technology to progress in manufacturing.
"We have an aspiration to go to a $5 trillion economy. Again, there is a distinct thought process of Make in India -- import substitution also. You need more investments. All those investments should come in technology and education," said Singh.
Feature Presentation: Aslam Hunani/Rediff.com
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