Tamil Nadu, which experienced the effects of drought and demonetisation during the previous financial year of 2016-17, clocked a growth rate of 7.94%, about one percentage point less than that of the previous year. Political instability followed by the death of former Chief Minister Jayalalithaa could also have played a dampener.
As in the previous years, the growth was driven largely by the services sector this year. The primary sector, comprising agriculture and allied activities, continued to record a negative trend while the growth rate of industry fell to 3.98% from 7.19% in 2015-16. In essence, the benefit of the impressive performance of the services sector was neutralised considerably by the other two sectors.
The data for 2016-17 pertain to advanced estimates provisional and the State authorities are likely to come out with advanced estimates next month.
A look at the data shows that constituents of the services sector such as communication and real estate registered double digit growth rates of 11.55% and 11.14%. Within industry, construction recorded 7.75% growth rate, whereas manufacturing had a bare 1.65%. As for the sector of agriculture and allied activities, livestock and fishery were the only two constituents that had positive figures of growth with 2.69% and 7.83%.
K.R. Shanmugam, Director of the Madras School of Economics, says that if one were to look at the State’s growth story over the years, it is clear that the State’s economy will be hit by external factors, as it is the services sector that is acting as the driver. He cites tourist flow and hospitality segment as two direct impacts. In 2016-17, the growth rate of trade, repair service, hotels and restaurants, all coming under the services sector, was 11.41%.
Even though the State, under the present circumstances, has done better than many others, it has the potential of recording even 10% growth, if the State government concentrates on improving the sectors of agriculture and industry, Mr. Shanmugam adds.
What has not gone unnoticed among policy makers of the State is that demonetisation did not cause much adverse impact on the economy of Tamil Nadu, even though it is still too early to judge the full effects.
