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There are several factors that affect evolution of an industry in a
particular region. The major factors impacting evolution are:
Policy proactiveness: The policy that a state government adopts
towards a sector directly affects its attractiveness for further investment.
For example, the Government of Tamil Nadu has given several concessions in the
IT sector. This has prompted a number of IT majors, both domestic such as
Infosys and Wipro as well as multinationals such as Cognizant, to set up
software development operations in the state.
Availability of natural resources: Certain industries such as
agro-based have a high dependence on availability of natural resources. The
western part of the state has emerged as a major agriculture hub owing to the
suitable climatic conditions.
■ Capability: Availability of good quality manpower is a must for all industries to flourish. High literacy rates and
presence of good education and vocational training institutions have ensured
that the state has well qualified manpower. This has been a major factor
enabling the success of Tamil Nadu in sectors such as engineering, automotive,
IT and ITES. Given its strong base of technical workforce, knowledge-intensive
industries are gradually taking a lead position in the state.
Based on an assessment of the above factors, some of the industries with
potential for investment and growth in the state are illustrated below:
The assessment is based on KPMG analysis. It is relative,
subjective and not meant for statistical analysis.
Key industries
In the post liberalisation era, the state has emerged as one of the
front-runners in attracting investment proposals. Tamil Nadu is in the top
quartile in the total number of enterprises in the country with a consistent
growth rate of 19 per cent.
Cotton textiles, Hosiery and Readymade garmentsTamil Nadu is one of the world's leading cotton textile centres. The state
contributes more than 25 per cent to the country's exports of cotton yarn and
fabrics. It continues to maintain its leading position in the industry and
number of multinationals such as Wal-Mart, Tommy Hilfiger, GAP, Diesel etc. have
made the state a global sourcing hub for readymade garments owing to the
comparatively low production costs and high quality of output. With the phase
out of the Agreement on Textile and Clothing (ATC), the state is well positioned
to significantly increase its textile exports.
Tirupur Textile Cluster
Tirupur is an important trade centre of the country, which is famous for its
knitted garment wears. It is situated near Coimbatore, which is known as 'the
Manchester of south India'.Tirupur textiles cluster has units in spinning,
knitting, wet processing, printing, garment manufacturing and export. In
addition, there are ancillary units supplying buttons, laces, embroidery, cones
and yarn processing.
Tirupur has a significant presence at the lower end of the international
hosiery and knitwear market. Most entrepreneurs cater to the lower end of the
hosiery market on a contract-manufacturing basis. The cluster accounts for 90 per
cent of the country's cotton knitwear exports. With 300,000 employees, it has
recorded total exports of US$ 900 million approximately.
Information TechnologyTamil Nadu is among the leading states in the IT sector with exports of US$
2.3 billion approximately, in 2004-05. The state has over 1,200 software export
companies and more than 90,000 IT professionals. To give an impetus to this
industry, the Government of Tamil Nadu has announced an attractive IT Policy,
offering added incentives and infrastructure support to investors. The state,
through TIDCO and ELCOT has promoted TIDEL Park, a state-of-the-art facility for
the IT Industry*.
Automotive and Auto components The state has a well-developed automotive and auto component
industry. It has manufacturing facilities across the automotive spectrum from
tractors to battle tanks. Fortune 500 companies such as Hyundai and Ford have
established manufacturing facilities in the state. The auto component industry is
estimated to have an output of US$ 1.2 billion.
Coimbatore Pumps and Motors Manufacturing Cluster
With modernisation of agriculture and rise in standard of living of the
middle class, the demand for pumps is growing at a fast pace. Coimbatore Pumps
and Motors manufacturing cluster with over 1,000 units are meeting almost 40 per
cent of the country's requirements of pump sets. Coimbatore pumps are being
exported for over 25 years. The industry has demonstrated tremendous flexibility
by incorporating design changes to suit the site conditions. It has maintained
quality, reliability and performance.
LeatherThe state has 70 per cent of the total installed capacity of hide and skin.
It has a dominant presence in the leather and leather-based industries. The State
Government is geared to provide all possible capital subsidies and
infrastructure support by setting up industrial estates and common effluent
treatment plants.
Chemicals and PetrochemicalsThe chemicals industry has grown rapidly in India and overseas. The state traditionally has a strong base in the
chemicals industry. Manali, situatedon the outskirts of Chennai has emerged as a
major petrochemicals complex.
TourismIn 2003,40 different tourism projects with a total
investment of US$ 423.4 million have been sanctioned and
are in progress. In terms of investment in the tourism
sector, the state ranks among the top five in the country.
Mineral-basedThe mineral wealth of the state comprises granite, limestone and lignite.
Neyveli Lignite Corporation has the country's biggest opencast mechanised
lignite mines, mining 24 MTPA of lignite and generating 2,490 MW of power. The
state's limestone reserves stands at 1,473 million tonnes. There are 12 major
cement plants functioning in the state. The major players are Tamil Nadu Cements
(TANCEM), Dalmia Cements, Madras Cements, India Cements, Grasim Industries,
Associated Cement Companies and Chettinad Cements.
EngineeringThe engineering industry in the state consists of a network of nearly 3,000
units and employs a skilled workforce of more than 250,000, making high quality
inputs such as castings and forgings and a wide variety of ancillary products.
Efforts are being made to boost further development of this industry by enabling
formation of industry clusters.
Agro-basedOwing to the ideal climatic conditions a strong agro-based food industry has
emerged in the state. The state is a world leader in agricultural production with
a high yield per hectare of sugarcane, rice and groundnut. The Madurai-Dindigul
belt in Tamil Nadu has favourable climatic conditions for the cultivation of a
variety of fruits and vegetables.
The floriculture industry is likely to get a thrust with the area around
Coimbatore, Dharmapuri and the Nilgiris being earmarked as locations ideal for
the cultivation of flowers such as rose and chrysanthemum. Of these, Coimbatore
has been identified as an intensive floriculture zone.
Exports
Tamil Nadu has performed well in the thrust industries recording a
healthy-growth rate in exports. Exports from agro-based industries and software
sector have shown a CAGR of 60 per cent approximately.
Source: Electronic Corporation of Tamil Nadu (ELCOT)
Source: CMIE Prowess Database (+)
4 year CAGR Size of circle indicates exports
in US$ million
Investment
Source: Projects Today
Multinationals such as Hyundai and Saint Gobain are investing in capacity
enhancement measures in the state. Likewise Honeywell International Inc. has
invested US$ 65 million to set up a manufacturing centre.
The emergence of Tamil Nadu as a centre for manufacturing is in part due to
the flow of foreign direct investment in the state. The state has successfully
attracted a high quantum of investment in the manufacturing, IT and
infrastructure sectors. The state has modelled itself as an attractive
destination on the basis of sound infrastructure support, a quality workforce
and policy initiatives by the State Government. The major foreign direct
investment in the state is illustrated in the table below.
|
Company |
Country of Origin |
Segment |
Investment
(US$ million) |
|
Hyundai Motors |
South Korea |
Automotive |
900 |
|
Ford Motor India |
USA |
Automotive |
380 |
|
P&O Ports |
UK |
Port Infrastructure |
150 |
|
St. Gobain |
France |
Glass Manufacturing |
125 |
|
Visteon |
USA |
Auto Component |
120 |
|
Mitsubushi |
Japan |
Automotive |
50 |
|
Xansa |
South Korea |
IT |
47 |
|
Matsushita |
South Korea |
Electronics |
12 |
Potential hubs for investment
Manufacturing and sourcing base
Some of automotive multinationals that have set
up operations in the state are leveraging their plants as global sourcing hubs.
Hyundai Motors has made Chennai a global production base for the compact car
segment. Banking on its successful Indian operations, Hyundai has invested US$
220 million approximately, in its Chennai plant in order to increase its
production capacity and has launched its C segment car, Getz, and sports utility
vehicle, Terracan. Hyundai has a global strategy to gradually shift the export base from South Korea to India to
capitalise on lower shipping costs to Europe and Latin America and reduce
delivery cycle times.
Ford Motor Company has made its plant in the state as a sourcing base for its
mid-size car, the Ikon. Owing to the cost advantage in India, Ford is also
sourcing auto components for its US, European and Chinese operations from the
state.
R&D, Software development and BPO hubThe emergence of Chennai as an IT hub and the availability of
a quality workforce have enabled the city in particular and the state in general
to emerge as a centre for R&D in the country. The presence of a large number
of engineering institutions, including IIT Chennai and Anna University have
further augmented the state's claim as a prominent centre for R&D activity.
Companies such as Temenos (world leader in banking software) have invested to
the tune of US$ 15 million in R&D facilities in the state. Kone, the Finnish
elevator giant is now sourcing all its software development from Chennai. Airbee
Wireless, a US based software company, has invested US$ 1 million to set up an
R&D centre in Chennai. Software majors such as Cognizant, TCS and Infosys
have set up software development centres in Chennai.
BPO outfits for a number of multinationals such as ABN AM RO, Standard
Chartered and World Bank now operate from Chennai. The city also has the largest
medical transcription facility in Asia.
Investment overseas by Tamil Nadu based companies
Sundaram Fasteners, the first ISO 9000 certified subsidiary of the TVS Group
has invested US$ 5 million approximately, and plans to invest up to US$ 12.5
million. Sundaram Fasteners is the first company in the Indian engineering
industry to set up a manufacturing unit in China. The initial capacity of the
plant is 6,000 tonnes and the company aims to generate 25 per cent of the export
revenues from this plant. The company also plans to buy the UK-based forging
company Dana Spicer. Another group company, the two-wheeler manufacturer, TVS
Motors , is planning to set up an unit in Indonesia.
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