Tamil Nadu has set an ambitious target of becoming a $1 trillion economy by 2030, requiring a Gross State Domestic Product (GSDP) of ₹87 lakh crore. However, as the state prepares for the 2025-26 budget, experts warn that bridging the ₹50.54 lakh crore gap within the next four years will be a significant challenge.
The Growth Gap: Current Projections vs. Target
The Finance Minister projected ₹36.56 lakh crore as Tamil Nadu’s GSDP for 2025-26, with estimated growth rates of 16% in 2025-26 and 16.5% in 2026-27. If this trend continues, the state is expected to reach ₹67.36 lakh crore by 2030, still ₹20 lakh crore short of its goal.
Key Growth Drivers
According to Chartered Accountant Subramanian, GSDP growth is primarily influenced by public expenditure, private consumption, capital investment, and net exports. He emphasizes that “Tamil Nadu must aggressively attract private investment to compensate for any shortfalls in public sector efficiency. The success of initiatives like the Global Investors Meet is critical in this regard.”
At the 2024 Global Investors Meet, Tamil Nadu secured ₹9.74 lakh crore in investment commitments, which will be implemented over the next 4-5 years. However, the challenge lies in fast-tracking project execution and ensuring efficient capital deployment.
Challenges in Public Sector Undertakings (PSUs)
The financial health of Tamil Nadu’s PSUs remains a concern. The 2021 White Paper revealed that the average return on capital employed was just 0.45%, compared to an 8.08% borrowing cost. Out of 60 PSUs, 26 are loss-making, relying on government guarantees due to poor credit ratings.
Subramanian warns that “Tamil Nadu’s PSUs are a major drag on state finances. Without immediate reforms, their losses will only widen, affecting overall economic growth.” The 2025-26 budget is expected to provide updates on PSU performance, with potential restructuring or privatization measures.
Debt Management: A Growing Concern
Tamil Nadu’s borrowing levels continue to rise, with projected debt figures of ₹8.33 lakh crore in 2024-25 and ₹9.43 lakh crore in 2025-26. Balancing economic expansion while managing this debt burden will be a major fiscal challenge.
“Tamil Nadu cannot afford to rely solely on borrowing to drive growth,” says Subramanian. “The focus must shift towards improving revenue streams through industrial expansion, better tax compliance, and optimizing government spending.”
The Road Ahead
A five-member committee, appointed in 2021, is expected to present strategic recommendations on achieving the $1 trillion economy goal. The 2025-26 budget will serve as a crucial indicator of how the government plans to bridge the gap and accelerate Tamil Nadu’s growth trajectory.
With private investment, PSU reforms, and better fiscal management, Tamil Nadu’s economic vision is achievable—but the next few years will be decisive in determining whether the state meets its ambitious goal.
