Tamil Nadu's Next Industrial Policy Has to Climb the Value Chain

Two to three enquiries a day. That is the current rate at which companies are asking about setting up global capability centres in India, weighing Bengaluru against Hyderabad against Chennai.

Tamil Nadu is in that conversation every time. The question industry veterans are raising as the state drafts a new industrial policy is whether being in the conversation is the same as winning it.

The old policy worked, which is the problem

The case for a new policy is not failure. Industrial Policy 2021 targeted ₹10 lakh crore of investment and 20 lakh jobs by 2025, and manufacturing grew at a 9–10% CAGR over five years. Electronics is the clearest proof: exports went from $5.37 billion in FY23 to $14.65 billion in FY25, pushing TN past 41% of India's electronics exports, with Kancheepuram now the country's second-largest exporting district. The state remains India's largest garment exporter and makes roughly a third of its non-leather footwear.

"TN does need a new industrial policy, not because the current one has failed, but because the ecosystem it was drawn for no longer exists," says Nithin Chandra, senior partner at Kearney.

What changed is the competitive landscape — new trade agreements, and investment flowing into semiconductors, EVs, aerospace and critical minerals. The policy did its job. The job changed.

Assembly is not the same as capability

The theme running through almost everyone TOI spoke to is the gap between attracting capital and building capability.

P Ravichandran, chairman of CII Southern Region, frames the test as whether every rupee creates more local value, technology, IP and global market access. His view of the next phase: fewer new assembly lines, more design labs, precision toolrooms, engineering centres and IP.

Electronics shows the clearest path to deepening. Beyond assembly, the targets named are PCBs, displays, connectors, semiconductor design, ATMP, industrial electronics and R&D. The state's auto-component base points the same way — battery cells, battery-management systems, power electronics, motors, vehicle R&D.

Non-leather footwear is the worked example of how this happens. Anchor investors including Hong Fu, Pou Chen, Feng Tay and Evervan Kothari brought roughly ₹6,550 crore and more than 86,000 jobs across five districts, many held by women. Chandra's read on the template: find a sector looking for China-plus-one, court two or three anchor investors, let the vendor ecosystem follow. Then climb into design, branding and higher-value materials.

Three openings

GCCs, most immediately. Chennai's GCC headcount has roughly doubled since 2019. The differentiation available is in engineering- and manufacturing-linked centres rather than generic back-office scale, and the model extends to Coimbatore, Madurai and Trichy.

Defence and aerospace. The state's defence industrial corridor has drawn over ₹23,000 crore against a 2032 target of ₹75,000 crore.

Advanced capital goods and heavy engineering, including shipbuilding and the blue economy.

The disagreements worth reading

Not everyone frames it the same way, and the disagreements are more useful than the consensus.

Ramkumar Ramamoorthy, partner at Catalincs and former CMD of Cognizant India, argues the binding constraint is organisational, not financial: departments working in silos dilute their own impact. He wants an overarching body — his analogy is the department of military affairs unifying the three services — with power to define ownership across academia, industry and government.

Prof Vidya Mahambare of Great Lakes Institute of Management pushes back on subsidy design directly. Industrial subsidies have to align with local skills, or public money ends up subsidising jobs for migrant workers while youth unemployment sits untouched. Her preference is broad-based infrastructure over sector-specific incentives, which she says often fail to create significant new jobs.

A Viswanathan, president of the Madras Chamber of Commerce & Industry, warns against reading new-age sectors as a replacement: semiconductors, AI, aerospace, advanced manufacturing, GCCs and R&D should complement traditional industries that supply inputs to them and consume their output.

On incentive mechanics, Chandra points at Gujarat's "choose your incentive" approach — letting investors pick between capital subsidy, interest subsidy or power-tariff relief — as a benchmark worth studying.

State industries minister S Keerthana's position: "We are not moving away from manufacturing." The stated approach is supporting sectors that generate employment at scale while building a differentiated framework for newer, higher-value ones.

The question the policy should answer

Tamil Nadu already has what a lot of emerging manufacturing hubs are still trying to assemble — an industrial base, talent, supplier networks, export orientation. Ravichandran's framing is that the task is climbing the value chain before rivals do.

The reframe that stuck with me is his test for the next policy. Not "how much investment did we attract," but "what did that investment make Tamil Nadu capable of doing that it couldn't before?"

It is a harder number to put in a press release, and the only one that compounds.

Source: Moving up the value chain