Tamil Nadu can achieve its trillion-dollar economy milestone by 2031 if it sustains the 2024-25 nominal growth rate of 16%, “with an assumption of 2% (medium-term rate) rise in the value of dollar against rupee per annum in the medium term,” according to the Economic Survey of Tamil Nadu 2025-26. “With 3.5% short term rate of rise of dollar value, it may be delayed for a year,” said the Survey prepared by the State Planning Commission (SPC) with details from the Finance Department and several subject experts.
The Survey was handed over to Chief Minister M.K. Stalin on Monday (February 16, 2026).
Commenting on the second Economic Survey of the DMK government, J. Jeyaranjan, Executive Vice Chairman of the SPC, in his foreword, mentioned the State focused and continues to focus on both growth and social justice, resulting in a robust model for many other States to emulate. “This unique model has resulted in a balanced sectoral growth. In fact, our double-digit growth recorded last year was spearheaded by the secondary sector, which our national economy and many other States aim to achieve.”
The Survey not only highlights the “stellar performance” of the State’s economy but also indicates the areas of concern that need to be addressed to reach the desired twin targets of a trillion-dollar economy and a per capita income on par with developed countries.
Textile exports
The 263-page report also pointed out the State’s textile exports, which account for a major share of Tamil Nadu’s export, are facing headwinds due to the recent 50% hike in the United States’ tariffs. Nearly 30% of the State’s textile exports are directed to the U.S. market. “While this poses a temporary setback, the Union government’s suspension of the 11% customs duty on cotton until December 2025 offers partial relief to the sector. At the same time, Tamil Nadu is actively diversifying its export markets to reduce dependence on traditional destinations and align with the shifting contours of global trade,” the report said. The recent India-European Union (EU) free trade agreement and the India-U.S. trade agreement, by which U.S. tariffs on Indian goods will reduce from 50% to 18% soon, may help in this regard.
Since February 2025, multiple rounds of U.S. tariffs and retaliatory measures heightened trade uncertainty. The global economy grew at 3.3% in 2025. India’s economy recorded 6.49% in 2024-25, but increased its growth performance to 7.4% in 2025-26. Despite global headwinds, Tamil Nadu remained resilient.
The Economic Survey also mentioned that Tamil Nadu’s per capita income growth has consistently outpaced the national average. In 2024-25, per capita income reached ₹3.62 lakh, which is 1.77 times higher than the national average of ₹2.05 lakh, making Tamil Nadu the third-largest State in terms of per capita income. Despite accounting for only 4% of India’s land area and 6% of its population, the State contributed 9.4% to the national GDP in 2024-25. Its Gross State Domestic Product at current prices reached ₹31.19 lakh crore in 2024-25, reflecting a nominal growth rate of 16% and a real growth rate of 11.2% – the highest among major States.
Fiscal policy has broadly supported Tamil Nadu’s growth trajectory. While the pandemic necessitated expansionary measures that raised deficits and debt, subsequent years have seen stabilisation alongside a strong push for capital formation. Total capital expenditure between 2020-21 and 2025-26 amounts to ₹2.54 lakh crore, reflecting a decisive emphasis on asset creation. “Although the debt-to-GSDP ratio remains below the thresholds recommended by the Fifteenth Finance Commission, future pressures arising from pay revisions, pensions, and GST rationalisation could strain fiscal space. Sustaining growth will, therefore, require disciplined and productive use of resources,” the Survey pointed out.
Welfare programmes
Besides, Tamil Nadu government has consistently increased its expenditure on the social sector, rising from ₹1,13,268 crore in 2021-22 to ₹1,57,864 crore in 2025-26 (RE). Over time, the State has built one of India’s most extensive and innovative welfare architectures. Programmes such as Naan Mudhalvan, Pudhumai Penn, Tamizh Pudhalvan, the Chief Minister’s Breakfast Scheme, Kalaignar Magalir Urimai Thittam, and large-scale housing and urban renewal initiatives expand capabilities, reduce household risk, and strengthen aspirations. These interventions are not merely redistributive; they stabilise consumption, sustain domestic demand, and enable workers to avoid distress-driven employment.
According to the Survey, urban inflation in Tamil Nadu declined from 5.2% in 2023-24 to 2.5 % in 2025-26, while rural inflation fell from 5.8% to 2.1%. Urban inflation remains the primary driver of overall inflation in the State. Among major categories, food inflation declined sharply to -0.003 % in 2025-26, while inflation in clothing and footwear moderated to 1.3%. Although inflation is primarily a monetary phenomenon, its impact is felt directly by households through erosion of purchasing power. “The Tamil Nadu government has worked to mitigate these effects through subsidised supplies of essential commodities such as cereals, pulses, edible oil, and electricity, along with income-support programmes including the Kalaignar Mahalir Urimai Thittam,” the Survey highlighted.
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The manufacturing sector recorded a real growth rate of 14.74% in 2024-25, more than three times the all-India average of 4.5%. Over the four-year period from 2021-22 to 2024-25, Tamil Nadu led the nation with an average manufacturing growth rate of 9.38%. The adoption of advanced technologies, the presence of research institutions, and the development of IT clusters in Chennai, Coimbatore, and Hosur have further strengthened productivity and innovation. The Economic Survey of India 2025-26 recognises Tamil Nadu as the foremost contributor to India’s manufacturing employment, accounting for 15% of the nation’s total factory workforce.
In 2024-25, the primary sector contributed 13.4%.to the State’s Gross State Value Added, the secondary sector 33.1% and the services sector contributed 53.6%. The services sector also registered strong performance, achieving a double-digit real growth rate of 11.3% in 2024-25.
“Tamil Nadu continues to rank among the top Indian States in attracting foreign direct investment. While India’s overall FDI equity inflows declined from $46.03 billion in 2022-23 to $44.42 billion in 2023-24 amid global uncertainty and tighter financial conditions, Tamil Nadu defied the trend. The State’s FDI inflows increased steadily from $2,169 million in 2022-23 to $2,436 million in 2023-24, and further to $3,681 million in 2024-25,” it said.
Besides, the State consistently ranks first in exports of electronics, textiles, and leather products, and second in engineering exports. Merchandise exports nearly doubled from $26.15 billion in 2020-21 to $52.07 billion in 2024-25, highlighting the State’s industrial diversification.
Published – February 16, 2026 12:51 pm IST
