8

2. STATE INCOME

High quality growth is defined by the International Monetary Fund (IMF) as
growth that is sustainable, brings lasting gains in employment and living standards
and reduces poverty. High quality growth should promote greater equity and equality
of opportunity. It should respect human freedom and protect the environment.
Obviously, growth cannot be of high quality, if it does not benefit fully, tangibly and
equitably a group that constitutes more than one half the population of the world and
still bears the primary responsibility for the care, nutrition and education of the
worlds children. Achieving high-quality growth depends, therefore, not only on
pursuing sound economic policies, but also on implementing a broad range of social
policies.

Criteria for judging economic development which are diverse in nature are as
follows:

equality of opportunity;
a rising income and standard of living, including a wider array of consumable
goods and services over time;
equity in the distribution of income and wealth;
political democracy and wide-spread participation;
an expanded role for women, minorities and all social classes in economic,
political and social life;
increased opportunities for education and self-improvement irrespective of
class, race, ethnicity, religion or gender;
the expanded availability of, and improvements in, health care;
public and private safety nets to protect the most vulnerable particularly the
young, the old, the infirm and the poorer from extreme hardship;
a reasonably clean and healthy environment;
an efficient, competent, transparent, and fairly administered public sector;
a reasonable degree of competition in the private sector; and so on.

Gross State Domestic Product is a summary measure of the aggregate
performance of the State economy. The Central Statistical Organisation had shifted
the base year from 1999-2000 to 2004-05 to capture the dynamic changes taking place
in the economy. In line with this change, the Directorate of Economics and Statistics
had also effected a base year change in the GSDP estimation. This includes coverage
of new economic activities and improvements in procedures.

The State economy performed
well on three occasions out of six year
period under reference. The years of
2005-06, 2006-07 and 2009-10 exhibited
double-digit growth rates. During 2008-
09, the growth was subdued due to global
recession and anaemic performance of
primary sector. Taken together, the
economy clocked an impressive growth
rate of 10.06 per cent during the period
Sectoral Growth Rate (%) Tmil Nadu
-5
0
5
10
15
20
25
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
Pr imar y
Secodar y
Ter t iar y
9
under reference. Sector-wise, the service sector registered an average annual growth
rate of 11.11 per cent, followed by secondary sector (10.07%) and primary sector
(4.87%) at constant prices. Relevant information is furnished below.

Table 2.1: Sectoral Growth of Gross State Domestic Product at Factor Cost Tamil Nadu
(2004-05 New Series)
(` Crore)
At Constant Prices
Primary Secondary Tertiary GSDP
Year
Income Growth
Rate(%)
Income Growth
Rate(%)
Income Growth
Rate(%)
Income Growth
Rate(%)
2004-05 25995 - 67679 - 125329 - 219003 -
2005-06 29146 12.12 77518 14.54 142904 14.02 249567 13.96
2006-07 32866 12.76 88078 13.62 166586 16.57 287530 15.21
2007-08 31508 (-)4.13 91517 3.90 182131 9.33 305157 6.13
2008-09 30794 (-)2.27 89630 (-)2.06 199661 9.62 320085 4.89
2009-10
(RE)
32737 6.31 108574 21.14 211927 6.14 353238 10.36
2010-11
(QE)
34176 4.40 118645 9.28 235152 10.96 387973 9.83
AAGR
(2006-11)
4.87 10.07 11.11 10.06
At Current Prices
2004-05 25995 - 67679 - 125329 - 219003 -
2005-06 31699 21.94 80068 18.30 146067 16.55 257833 17.73
2006-07 39173 23.58 96758 20.04 174595 19.53 310526 20.44
2007-08 43888 12.04 107103 10.69 199828 14.45 350819 12.98
2008-09 50109 14.17 113131 5.63 238096 19.15 401336 14.40
2009-10
(RE)
65883 31.48 141795 25.34 272042 14.26 479720 19.53
2010-11
(QE)
77307 17.34 164664 16.13 324451 19.27 566422 18.07
AAGR
(2006-11)
20.09 16.02 17.20 17.19
Note: RE Revised Estimates, QE Quick Estimates.
Source: Directorate of Economics and Statistics, Chennai - 6.

2.1. Growth Rates of Tamil Nadu vis-a-vis All India A comparison:

Both at the National and State
levels, growth rates are not
sustained one.
International and domestic
factors have influenced the
growth rates of Tamil Nadu
and all India through
integration of world
economies.
The growth rate of Tamil
Nadu is more pronounced
than all India.
In real terms, growth rate is hovering between 7 and 10 per cent at all India as
compared to 5 to 15 per cent for Tamil Nadu.


GSDP / GDP Growth Rate (%)
0
4
8
12
16
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
Tamil Nadu
All India
10
Table 2.2: Growth Rates of GSDP and GDP
(Per cent)
Tamil Nadu All India Year
At Current
Prices
At Constant
Prices
At Current
Prices
At Constant
Prices
2004-05 - - - -
2005-06 17.73 13.96 14.07 9.52
2006-07 20.44 15.21 16.60 9.58
2007-08 12.98 6.13 15.92 9.34
2008-09 14.40 4.89 16.32 6.91
2009-10 19.53 10.36 15.32 8.29
2010-11 18.07 9.83 17.49 8.39
AAGR
(2006-11)
17.19 10.06 15.95 8.67
Source: 1. Directorate of Economics and Statistics, Chennai. 2. CSO, New Delhi.

2.2. Per Capita Income: Tamil Nadu Vs-a-Vs All India:

The growth in GSDP reflects to what extent extensive growth occurring in the
State whereas the real per capita income mirrors to what extent the intensive growth
taking place in the State. Intensive growth occurs with rise in per capita income
which is sustained over long periods of time. Intensive growth becomes established
both at all India and in the State. The increasing income of the services sector had
highly influenced the per capita income in the State. The assured food security and
social welfare measures such as education, health aspects, old age pension, maternity
and marriage assistances, housing, sanitation, drinking water supply etc. coupled with
increase in per capita income had improved the standard of living of the people in the
State.

Per capita income at constant
prices grew at 8.82 per cent in Tamil
Nadu whereas it rose at 6.07 per cent at
all India, lower than that of for Tamil
Nadu. At current prices, the trend
growth rates for Tamil Nadu was at
16.62 per cent as compared to 14.14 per
cent for the Nation.


Table 2.3: Per Capita Income (2004-05)
Tamil Nadu All India
At Current Prices At Constant Prices At Current Prices At Constant Prices
Year
Income
(`)
Growth
Rate(%)
Income
(`)
Growth
Rate(%)
Income
(`)
Growth
Rate(%)
Income
(`)
Growth
Rate(%)
2004-05 30062 - 30062 - 24123 - 24143 -
2005-06 35243 17.23 34126 13.52 27123 12.44 26025 7.80
2006-07 42288 19.99 39166 11.77 31198 15.02 28083 7.91
2007-08 47606 12.58 41314 5.48 35430 13.56 30316 7.95
2008-09 54140 13.73 42939 3.93 40605 14.61 31801 4.90
2009-10 (RE) 64336 18.83 46886 9.19 46117 13.57 33843 6.42
2010-11 (QE) 75449 17.27 51117 9.02 53331 15.64 35993 6.35
AAGR
(2006-11)
16.62 8.82 14.14 6.07
Note: RE Revised Estimates, QE Quick Estimates.
Source: Directorate of Economics and Statistics, Chennai 6.
Percapita Income Growth Rate (%)
0
4
8
12
16
2005-
06
2006-
07
2007-
08
2008-
09
2009-
10
2010-
11
Tamil Nadu
All India
11
2.3. Review of Gross State Domestic Product: Eleventh Five Year Plan (2007-11):

The broad objective of Eleventh Five Year Plan was to achieve a steady and
sustainable growth of the State economy with social justice through adequate
education and employment opportunities. It also aimed to upgrade the quality of life
of urban and rural population by providing essential basic amenities such as water
supply and sanitation. Along with this target-oriented objective, the main focus of
Eleventh Plan was inclusive growth so as to bring the vulnerable and marginalized
groups within the social security net. The economic growth of the State was as
inclusive as possible to encompass all sections of the society and it ensured that each
and every one got to reap the fruits of development. The State had adopted a target of
an overall growth rate of 9 per cent on par with the recommendations of the National
Development Council for the Indian Economy.

In this backdrop for the period of 2007-11 (for the first four years of the
Eleventh Plan), the State economy registered an overall growth of 7.80 per cent, as
against the target of 9.0 per cent per annum. The primary sector had not performed
well during this period and the growth rate was 1.08 per cent as against the target of
4.0 per cent. The main reason was that the major contributor of primary sector viz.
agriculture and allied activities had not performed well and registered a meager
growth of 0.78 per cent as against the target of 4.0 per cent. Fishing, forestry and
logging and mining and quarrying though achieved over and above the target, it could
not help to shore up the overall growth of primary sector due to their insignificant
weight in their contributions to GSDP.

The secondary sector achieved 8.07 per cent growth as against the targeted
growth of 9.2 per cent. The main contributor of secondary sector, viz. registered and
unregistered manufacturing groups had recorded a growth of 9.53 per cent in close to
the target of 9.9 per cent. Another sub-sector, viz. electricity, gas and water supply
had achieved a growth of 5.20 per cent nearing the target growth of 5.7 per cent.
Construction activities in the State fared well during this period and achieved the
targeted growth rate.

Tertiary sector had provided a comfortable cushion against the negative forces
operated both in primary and secondary sectors during the Eleventh Plan Period. This
sector registered a growth of 9.01 per cent as against the target of 10.1 per cent.
Almost all the sub-groups of the tertiary sector performed well in the State. The sub
sectors viz. railways, transport by other means, storage and real estate, ownership of
dwelling and business services by-passed the targeted growth. Details of sectoral and
sub-sectoral growth rates are presented below:










12
Table 2.4: Tenth Five Year Plan Vs. Eleventh Five Year Plan Sectoral and Sub-Sectoral
Projected Growth Rates and Annual Growth Rates Tamil Nadu

Tenth Plan (2002-07) Eleventh Plan (2007-11) Sector
Projected
Growth
Annual Average
Growth Rate
Projected
Growth
Annual Average
Growth Rate
1. Primary Sector 3.79 4.02 4.0 1.08
Agriculture and Allied Activities 4.00 4.37 4.0 0.78
Forestry and Logging 3.00 0.75 0.6 2.43
Fishing 1.50 4.46 1.5 2.36
Mining and Quarrying 0.40 6.66 2.0 2.65
2. Secondary Sector 7.12 9.10 9.2 8.07
Manufacturing
- Registered 8.00 8.89
- Unregistered 2.50 7.31
9.9 9.53
Electricity, Gas and Water Supply 6.00 11.87 5.7 5.20
Construction 10.50 11.93 8.5 8.56
3. Tertiary Sector 9.77 8.03 10.1 9.01
Trade, Hotels and Restaurants 6.50 8.85 7.7 5.10
Transport, Storage & Communication - - 11.5 9.30
Railways 6.00 5.73 4.3 12.34
Transport by other means 10.00 6.37 5.5 7.57
Storage 2.00 3.37 4.5 11.50
Communication 11.15 16.91 19.3 12.21
Banking and Insurance 14.00 11.41 - 12.17
Real Estate, Ownership of Dwelling
& Business Services
9.30 8.22 10.5 11.90
Community, Social and Personal
Services
- - 12.0 9.80
Public Administration 10.00 2.02 8.83
Other Services 9.50 5.65 10.33
Overall GSDP 8.00 7.59 9.00 7.80
Source: 1.Tenth Five Year Plan Tamil Nadu State Planning Commission.
2. Directorate of Economics and Statistics, Chennai.

2.4. Structural Transformation:

Economic development, as distinct from economic growth combines self-
sustaining growth, structural changes in the pattern of production, technological up-
gradation, social and institutional modernization and widespread improvement in
human conditions. Thus, the structural change in production structure is one of the
ingredients of economic development. Change in consumption pattern is a trigger
which brings about changes in structure of the labour force and composition of final
output. If economic growth occurs and real income rises, then the demand for goods
and services with high and positive income elasticities will increase relative to those
with low or even negative income elasticities. Apart from changing consumption
pattern, the technological break through, changes in capital accumulation and resource
availability, globalization, process inventions and innovation will ignite the structural
changes in production structure.

Economic transformation is being noticed in the State economy owing to the
above mentioned factors. The relative share of agriculture in GSDP shrank while the
relative share of services sector ratcheted up. The relative share of secondary sector
remained stagnant. Eventually, the State economy has become service-dominated
through time. The service sector had been the engine of overall economic growth.


13
In advanced nations, the
sectoral shift is from agriculture to
manufacturing and then to services.
The share of primary sector in Tamil
Nadu declined from 43.51 per cent in
1960-61 to 23.42 per cent in 1990-91
and further declined to 8.81 per cent in
2010-11. During the same period, the
share of secondary sector had increased
from 20.27 per cent to 33.10 per cent
and then declined to 30.58 per cent.
The primary and secondary sectors
paved the way for the services sector both in terms of growth and share. The share of
the services sector had leap frogged from 36.22 per cent in 1960-61 to 60.61 per cent
in 2010-11. The share of services sector picked up from nineties onwards.

Table 2.5: State Economy : Structural Changes

Sl.
No.
Sectors 1960-61 1970-71 1980-81 1990-91 1999-
2000
2004-05 2010-
11
1. Primary
Sector
43.51 34.79 25.92 23.42 17.41 11.86 8.81
2. Secondary
Sector
20.27 26.88 33.49 33.10 29.57 30.91 30.58
3. Tertiary
Sector
36.22 38.33 40.59 43.48 53.02 57.23 60.61
Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Source: Computed by DEAR.

Service sector provides an element of stability to the growth process. In recent
years, the growth of service sector has imparted much of resilience to the economy
particularly in times of adverse agricultural shock. It has emerged as a rich source of
tax revenue. Growth of service sector is sustained by an increasing demand for
producer and consumer services, coupled with external demand. The emergence of
producer services as an important source of service growth reflects strong inter-
linkages with commodity-producing sectors of the economy. Apart from providing
inputs, services contribute to the outward shift of the industrial sectors production
frontier by enhancing productivity growth. Conversely, service sector could be
sustained it adequate impulses are generated in industry and agriculture. Given
Indias comparative advantage in IT, service sectors growth momentum can be
sustained by exploiting new opportunities in international trade in services,
particularly, in the area of communication and information services, technology
transfer and software.

That there is a vast spread between the share of primary sector in total
employment (45.0%) and share of primary sector in GSDP (9.3%) is a concern. Two
things stand out the agricultural productivity is deplorably low and agriculture
remains the residual claimant of total work force. Majority of the people depend upon
agriculture for their livelihood living a hand-to-mouth existence.

The size of employment in the primary sector is higher than the secondary and
tertiary sectors, whereas the share of contribution to GSDP by the primary sector is
Sectoral share (%) Tamil Nadu
0
10
20
30
40
50
60
70
1960-
61
1970-
71
1980-
81
1990-
91
1999-
2000
2004-
05
2010-
11
Primary Secondary Tertiary
14
very much lower than the secondary and tertiary sectors. Growth in the primary
sector is also lower than that of secondary and tertiary sectors.

Table -2.6: Sectoral Share of Employment and GSDP Tamil Nadu

% share of
Employment GSDP
Sectors
1999-2000 2004-05 2009-2010 1999-2000 2004-2005 2009-2010
Primary 50.3 46.6 45.0 17.4 11.9 9.3
Secondary 23.7 26.0 27.4 29.6 30.9 30.7
Tertiary 26.0 27.4 27.6 53.0 57.2 60.0
Changes in share of
Employment GSDP
2004-05
over
1999-00
2009-10
over
2004-05
2009-10
over
1999-00
2004-05
over
1999-00
2009-10
over
2004-05
2009-10
over
1999-00
Primary (-)3.7 (-)1.6 (-)5.3 (-)5.5 (-)2.6 (-)8.1
Secondary 2.3 1.4 3.7 1.3 0.2 1.1
Tertiary 2.0 4.2 6.2 4.2 2.8 7.0
Source: 1. Computed by DEAR. 2. NSS Rounds 3. Department of Economics & Statistics, Chennai.

The standard of living of the rural people in the State depends upon the
economys ability to produce goods and services. Improvement in overall
productivity is mediated by critical ingredients such as quantum and quality of
physical capital, human capital, natural resources and technological breakthrough.

2.5. Sector-wise Productivity Per Employee:

In money terms, the overall productivity per employee in the State economy
increased manifold over the period of time. It increased from ` 20152 in 1993-94 to
`71421 in 2004-05. During the corresponding period, it doubled in primary sector,
more than doubled in the secondary sector and quadrupled in the services sector.
However, the compound annual growth rate calculated for each sector showed that
they declined for all the sectors over the period of time and they hovered around 10 to
11 per cent as given below.

Table-2.7: Sector-wise Productivity Per Employee
(at current prices)
Productivity (`)
Compound Annual Growth Rate
(CAGR)
Sl.
No.
Sector
1993-94 1999-00 2004-05 1999-00
over
1993-94
2004-05
over
1993-94
2004-05
over
1999-00
1. Primary 9239 16003 20577 10.96 10.76 10.52
2. Secondary 31068 57914 79579 11.09 10.89 10.66
3. Tertiary 34746 94267 132700 11.81 11.30 10.71
Total 20152 46320 71421 11.49 11.22 10.90
Source: Computed by DEAR.

2.6. Gross District Domestic Product Tamil Nadu:

The availability of data and information on District Income is vital for
prioritizing economic activities and optimizing district income and employment.
With the base year of 2004-05, the Department of Economics and Statistics (DoES)
15
prepared the district-wise Gross Domestic Product from 2004-05 to 2008-09. At
constant prices of 2004-05, Coimbatore district tops the list where the district income
increased from ` 20901 crore in 2004-05 to ` 31794 crore in 2008-09 followed by
Chennai, Tiruvallore, Kancheepuram, Vellore in that order. At the bottom level,
Perambalur district generated ` 1797 crore in 2004-05 and ` 2206 crore in 2008-09,
registering a Compound Annual Growth Rate (CAGR) of 5.19 per cent. However,
among the districts, Kanniyakumari had achieved the highest CAGR of 12.95 per cent
in 2008-09, followed by Krishnagiri (12.78%), Tiruchirappalli (11.96%) and
Tiruvallore (11.88%).

2.7. District Per capita Income:

The per capita income estimated in real terms showed a mixed trend for 2004-
05 and 2008-09. During 2004-05, Virudhunagar distrtict ranked first with a per capita
income of ` 40252/- followed by Thoothukudi district with ` 39613/-, Coimbatore
district with ` 39060/- whereas in 2008-09, Kanniyakumari district came first with
the highest per capita income of ` 61731/- followed by Coimatore district with
`55644/- and Virudhunagar district with ` 55249/-. The per capita income was at the
lowest level in Perambalur district with ` 13342/- in 2004-05 and ` 15944/- in 2008-
09 also. The Compound Annual Growth Rate calculated for the districts revealed that
Kanniyakumari (12.97%) stood first, followed by Krishnagiri (11.81%),
Tiruchirappalli (11.61%), Dharmapuri (10.49%), Kancheepuram (10.22%) and
Tiruvallore (10.19%) in that order and so on.

16
Table 2.8 : Gross District Domestic Product and Per Capita Income Tamil Nadu at 2004-05 Price

2004-05 (` lakh) 2008-09 (` lakh) Per capita income Sl.
No.
District
Primary Secon-
dary
Tertiary GDDP Primary Secon-
dary
Tertiary GDDP
CAGR
(%) of
GDDP
2004-
05 (`)
2008-09
(`)
CAGR
(%)
1. Chennai 26622 362958 1526423 1916003 25302 405834 2241799 2672934 8.68 37884 51774 8.12
2. Kancheepuram 70379 387230 715056 1172665 66413 514152 1220035 1800600 11.32 33442 49350 10.22
3. Tiruvallore 70094 500622 682900 1253616 75229 684490 1204572 1964291 11.88 35837 52837 10.19
4. Vellore 103502 442653 644221 1190376 117704 575924 1047044 1740672 9.97 28998 41206 9.18
5. Thiruvannamalai 94957 131206 258792 484955 115693 176449 400903 693045 9.34 19934 28379 9.23
6. Cuddalore 217145 130341 368340 715826 194749 156568 631576 982893 8.25 27397 37466 8.14
7. Villupuram 137007 131161 331246 599414 152069 169425 516088 837581 8.72 18143 25149 8.51
8. Tanjavur 96007 111812 391367 599186 112625 128782 611569 852976 9.23 24148 34328 9.19
9. Nagapattinam 104024 66817 205788 376629 117457 79126 300813 497396 7.20 22330 29042 6.79
10. Thiruvarur 42516 38777 155562 236855 57928 38423 222221 318572 7.69 18221 24552 7.74
11. Salem 95265 393042 542867 1031174 140929 487584 864598 1493111 9.70 29088 41316 9.17
12. Namakkal 115856 203612 291706 611174 179001 289007 470091 938099 11.34 34189 49438 9.66
13. Dharmapuri 80681 87318 203234 371233 103397 122683 353338 579418 11.77 24699 36817 10.49
14. Krishnagiri 63978 169490 253532 487000 92708 225601 469581 787890 12.78 25916 40499 11.81
15. The Nilgiris 61180 53926 136245 251351 65329 46696 213296 325321 6.66 28701 37542 6.94
16. Thiruchirappalli 81284 198099 603434 882817 90555 267724 1028998 1387277 11.96 31844 49405 11.61
17. Karur 35451 114374 196582 346407 49947 138892 323690 512529 10.29 32246 47633 10.24
18. Perambalur 60523 29605 89568 179696 63374 27956 129242 220572 5.19 13342 15944 4.55
19. Pudukkottai 80136 90430 205311 375877 68612 126157 317750 512519 8.06 22626 30161 7.45
20. Coimbatore 126024 894563 1069484 2090071 185481 1261932 1731955 3179368 11.06 39060 55644 9.25
21. Erode 153600 306749 546112 1006461 206456 441213 853510 1501179 10.51 33736 48688 9.61
22. Madurai 66180 233589 617066 916835 77164 288081 974212 1339457 9.94 31492 46012 9.94
23. Theni 75376 56494 166447 298317 94804 47311 230921 373036 5.75 24344 30868 6.12
24. Dindigul 120617 172022 333970 626609 139198 212369 504504 856071 8.12 28466 38525 7.86
25. Ramanathapuram 77467 64768 181518 323753 69553 103791 267491 440835 8.02 24695 33276 7.74
26. Sivagangai 41709 73781 192895 308385 41490 96834 305822 444146 9.55 23864 34223 9.43
27. Virudhunagar 45730 454381 356118 856229 67811 565717 558072 1191600 8.62 40252 55249 8.24
28. Thirunelveli 101486 350420 511590 963496 123738 519681 789478 1432898 10.42 31160 45183 9.73
29. Thoothukudi 89077 197519 429726 716322 97582 238053 637795 973430 7.98 39613 53578 7.84
30. Kanniyakumari 65635 320166 325780 711581 87114 526519 544124 1157757 12.95 37905 61731 12.97
Total 2599508 6767931 12532883 21900322 3079411 8962975 19966086 32008472 9.95 30062 42939 9.32
Source: Department of Economics and Statistics, Chennai.
17
2.8. Sectoral Composition of District Income:

Among the districts, the sectoral share of district income was converging
towards services sector from primary and secondary sectors between 2004-05 and
2008-09. It is a stark fact the share of primary sector had been declining while the
share of service sector had been increasing perceptibly. This trend reflected the trend
obtaining for the State as a whole during 2004-09. The share of secondary sector had
been shrinking in all districts. The State needs a broad-based manufacturing sector
and modernised agricultural sector. Relevant information is set out below.

Table -2.9 : Sectoral Composition of Gross District Domestic Product (%)
Primary Secondary Tertiary Sl.
No.
District
2004-05 2008-09 2004-05 2008-09 2004-05 2008-09
1. Chennai 1.39 0.95 18.9 15.18 79.67 83.87
2. Kancheepuram 6.00 3.69 33.02 28.55 60.98 67.76
3. Tiruvallore 5.59 3.83 39.93 34.85 54.48 61.32
4. Vellore 8.69 6.76 37.19 33.09 54.12 60.15
5. Thiruvannamalai 19.58 16.69 27.06 25.46 53.36 57.85
6. Cuddalore 30.34 19.81 18.21 15.93 51.46 64.26
7. Villupuram 22.86 18.16 21.88 20.23 55.26 61.62
8. Tanjavur 16.02 13.20 18.66 15.10 65.32 71.70
9. Nagapattinam 27.62 23.61 17.74 15.91 54.64 60.48
10. Thiruvarur 17.95 18.18 16.37 12.06 65.67 69.76
11. Salem 9.24 9.44 38.12 32.66 52.65 57.91
12. Namakkal 18.96 19.08 33.31 30.81 47.73 50.11
13. Dharmapuri 21.73 17.84 23.52 21.17 54.75 60.98
14. Krishnagiri 13.14 11.77 34.80 28.63 52.06 59.60
15. The Nilgiris 24.34 20.08 21.45 14.35 54.20 65.56
16. Thiruchirappalli 9.22 6.53 22.44 19.30 68.34 74.17
17. Karur 10.23 9.75 33.02 27.10 56.75 63.16
18. Perambalur 33.84 28.73 16.43 12.67 49.72 58.59
19. Pudukkottai 21.32 13.39 24.06 24.62 54.62 62.00
20. Coimbatore 6.03 5.83 42.80 39.69 51.17 54.47
21. Erode 15.26 13.75 30.48 29.39 54.26 56.86
22. Madurai 7.22 5.76 25.48 21.51 67.30 72.73
23. Theni 25.27 25.41 18.94 12.68 55.80 61.90
24. Dindigul 19.21 16.26 27.46 24.81 53.32 58.93
25. Ramanathapuram 23.93 15.78 20.01 23.54 56.07 60.68
26. Sivagangai 13.53 9.34 23.92 21.80 62.55 68.86
27. Virudhunagar 5.31 5.69 53.08 47.48 41.61 46.83
28. Thirunelveli 10.55 8.64 36.36 36.27 53.09 55.10
29. Thoothukudi 11.97 10.02 27.72 24.46 60.31 65.52
30. Kanniyakumari 26.15 7.52 36.60 45.48 37.25 47.00
Total 11.86 9.62 30.91 28.00 57.23 62.38
Source: Department of Economics and Statistics, Chennai.

2.9. Gross Fixed Capital Formation:

Capital accumulation is essential to economic development and growth as it is
a major carrier of technological change. It also plays a crucial role in the
development of infrastructure and construction of urban centres where manufacturing
and services cluster. In combination with other factors capital accumulation also sets
off structural changes. Thus economic transformation requires changes in pattern of
accumulation as new resources are invested in new sectors of the economy, thus
increasing their contribution to overall output.
18
Gross Fixed Capital Formation (GFCF) refers to the net increase in physical
assets (investment minus disposals) in various sectors of the economy within the
measurement period. It had not accounted for the consumption (depreciation) of fixed
capital and also does not include land purchase. It is a component of expenditure
approach which helps to calculate GDP / GSDP. The Gross Fixed Capital Formation
includes land improvements (fences, ditches, drains and so on) and purchase of plant,
machinery and equipment; construction of roads, railways, schools, offices, hospitals,
private residential dwellings, commercial and industrial buildings. (Domestic Capital
Formation as that part of countrys current output and imports which is not consumed
for export during the accounting period, but set aside an addition to its stock of
Capital Goods United Nations Statistical Office).

2.10. Industry-wise Gross Fixed Capital Formation (GFCF) for Tamil Nadu:

The Gross Fixed Capital Formation for the State increased from ` 42660 crore
in 2002-03 to ` 105185 crore in 2007-08 which registered a Compound Annual
Growth Rate (CAGR) of 19.78 per cent. During this period, the growth of GFCF in
terms of CAGR for primary sector stood at 13.43 per cent, secondary sector at 22.53
per cent and 18.49 per cent for tertiary sector. Within the sub-sectors, highest CAGR
was witnessed in Electricity, Gas and Water Supply (30.85%) followed by Public
Administration (26.65%). The industry-wise growth of GFCF is given in the
following table.

Table 2.10 : Industry-wise Gross Fixed Capital Formation Tamil Nadu
at Current Prices
(` in lakh)
Sl.
No.
Type of Industry 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 CAGR
(%)
I. Primary
(1+2+3+4)
268370 224208 262054 268673 296787 504039 13.43
1. Agri. & Allied
Activities
102097 96008 110947 118620 138944 148664 7.80
2. Forestry &
Logging
8894 9279 7342 11653 14750 13689 9.01
3. Fishing 67218 57667 57356 86713 96691 102819 8.87
4. Mining &
Quarrying
90161 61254 86409 51687 46402 238867 21.51
II. Secondary (5+6+7) 1586778 1948828 2455747 3152447 3607788 4382634 22.53
5. Manufacturing 1146747 1265890 1558887 1882704 2388527 3063152 21.71
6. Construction 179283 218014 271638 412103 440056 319103 12.22
7. Electricity, Gas &
Water Supply
260748 464924 625222 857640 779205 1000379 30.85
III. Tertiary (8-13) 2410879 2914936 3125629 3850758 4504627 5631791 18.49
8. Transport by other
means
324956 287283 272026 297425 313931 373422 2.82
9. Trade, Hotels &
Restaurants
210949 244200 295143 343765 421581 517197 19.65
10. Banking &
Insurance
32979 49682 42680 49606 69840 71795 16.83
11. Real estate
Ownership of
Dwelling
1599916 1899257 2256247 2682306 3254458 3953751 19.83
12. Public Admn. 178840 354486 181314 380059 370780 630184 26.65
13. Other Services 63239 80028 78219 97597 74037 85442 6.20
Total 4266027 5087972 5843430 7271878 8409202 10518464 19.78
Source: Report on Estimates of Gross Fixed Capital Formation in Tamil Nadu 2002-03 to 2007-08.

19
2.10.1. Gross Fixed Capital Formation for Public and Private Sector in Tamil
Nadu:

The Gross Fixed Capital
Formation between the public and
private sector plays a crucial role in the
planning process to attract investment to
achieve desirable objectives set in Five
Year Plans. During 2002-03, the share
of GFCF between public and private
sectors was in the ratio of 22.63 per cent
and 77.37 per cent respectively which
had declined to 19.32 per cent for the
public sector and increased to 80.68 per
cent for the private sector. The
compound annual growth rate of public sector was 16.05 per cent and 20.79 per cent
for private between the period of 2002-03 and 2007-08 as given below.

2.10.2 Share of GFCF in GSDP (Tamil Nadu) and GDP (All India):

The share of GFCF in GSDP in Tamil Nadu was more cyclical when
compared to all India. It was 26.97 per cent for the State during 2002-03 and showed
upward and downward trends in the succeeding years which plateaued out 30 per cent
in 2007-08, whereas at the national level, it showed a steady increase of 25.84 per
cent in 2002-03 and realized 35.59 per cent in 2007-08.

Table 2.12: Percentage Share of GFCF in Gross State Domestic Product of Tamil Nadu
(at current prices)
Tamil Nadu All India
(` in Crore) (` in Crore)
Year
GFCF GSDP
% of GFCF
to GSDP GFCF GDP
% of GFCF
to GDP
2002-03 42660 158155 26.97 584244 2261415 25.84
2003-04 50880 175370 29.01 687019 2538171 27.07
2004-05 58434 219233 26.65 931517 2971464 31.35
2005-06 72719 257730 28.22 1126915 3389621 33.25
2006-07 84092 310977 27.04 1347057 3952241 34.08
2007-08 105185 350785 29.99 1630514 4581422 35.59
Source: Report on Estimates of Gross Fixed Capital Formation in Tamil Nadu
2002-03 to 2007-08.

Tamil Nadu is seen as a magnet for attracting Foreign Direct Investment.
Thanks to several initiatives taken and proactive Industrial Policies forged, the flow of
FDI was surging over a period of time. This steady flow of FDI, coupled with the
accrual of domestic savings had made the State a power house of economic
development.

2.11. Millennium Development Goals:

The Millennium Development Goals aims at attainment of 8 goals, 18 targets
and 48 performance indicators in a time-bound manner. The goals mainly focus on
eradication of poverty and enhancement of Human Development Index. They are
delineated in Box 1.1.

Table 2.11 : Gross Fixed Capital Formation of
Tamil Nadu by Public and Private Sector
2002-03 to 2007-0 (at current prices)
(` in lakh)
Years Public
Sector
Private
Sector
Total
2002-03 965386 3300641 4266027
2003-04 1124967 3963005 5087972
2004-05 984764 4858666 5843430
2005-06 1416814 5855064 7271878
2006-07 1391480 7017722 8409202
2007-08 2031904 8486560 10518464
CAGR (%) 16.05 20.79 19.78
Source: Report on Estimates of Gross Fixed Capital
Formation in Tamil Nadu 2002-03 to 2007-08.
20
Box 2.1
The United Nations Millennium Development Goals
Source: The End of Poverty, How We Can Make it Happy in Our Life, Jim Jeffrey Sachs.
1. Eradicate extreme poverty and
hunger
Halve, between 1990 and 2015, the proportion of people
whose income is less than one dollar a day.
Halve, between 1990 and 2015 the proportion of people
who suffer fromhunger.
2. Achieve universal primary
education
Ensure that by 2015 children everywhere, boys and girls
alike will be able to complete a full course of primary
schooling.
3. Promote gender equality and
empower women
Eliminate gender disparity in primary and secondary
education, preferably by 2005, and to all levels of education
no later than 2015.
4. Reduce child mortality Reduce by two thirds, between 1990 and 2015, the under-
five mortality rate.
5. Improve maternal health Reduce by three quarters, between 1990 and 2015, the
maternal mortality ratio.
6. Combat HIV / AIDS, malaria and
other diseases
Have halted by 2015 and begun to reverse the spread of
HIV / AIDS.
Have halted by 2015 and begun to reverse the incidence of
malaria and other major diseases.
7. Ensure environmental
sustainability
Integrate the principles of sustainable development into
country policies and programs and reverse the loss of
environmental resources.
Halve by 2015 the proportion of people without sustainable
access to safe drinking water and basic sanitation.
By 2020 to have achieved a significant improvement in
lives of at least 100 million slum dwellers.
8. Develop a global partnership for
development
Development further an open, rule-based, predictable, non-
discriminatory trading and financial system. Includes a
commitment to good governance, development and poverty
reduction both nationally and internationally.
Address the special needs of the least developed countries.
This includes: tariff and quota-free access for least
developed countries exports; an enhanced program of debt
relief for HIPC and cancellation of official bilateral debt;
and more generous ODA for countries committed to
poverty reduction.
Address the special needs of landlocked countries and small
island developing states (through the Programof Action for
the Sustainable Development of Small Island Developing
States and the outcome of the twenty-second special session
of the General Assembly)
Deal comprehensively with the debt problems of
developing countries through national and international
measures in order to make debt sustainable in the long term.
In cooperation with developing countries, develop and
implement strategies for decent and productive work for
youth.
In cooperation with pharmaceutical companies, provide
access to affordable, essential drugs in developing
countries.
In cooperation with the private sector, make available the
benefits of new technologies, especially information and
communications.