Investing in Tamil Nadu: Manufacturing Outlook and Opportunities

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India Briefing profiles India’s southern state of Tamil Nadu, assessing its expanding electronics manufacturing capabilities and its aim of becoming the “Electric Vehicle” capital of the country. 

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Tamil Nadu, one of the four southern states in India, is home to over 83 million people and has an area of 50,216 square miles (130,058 square km). Located at the southeast end of the country, it shares its borders with the states of Karnataka, Kerala, and Andhra Pradesh. The primary language spoken in the state is Tamil.

One of the most urbanized states in India, Tamil Nadu’s economic profile has largely been influenced by agriculture, fisheries, and forestry. In terms of the industrial landscape, sectors such as textile milling, food processing, and the production of pharmaceuticals, chemicals, and electronic parts and equipment are beginning to contribute a significant portion to the state GDP.

Tracking state performance

As per a report by India’s Ministry of Statistics and Programme Implementation, Tamil Nadu holds the top position among Indian states in terms of both the quantity of factories and industrial workforce.

On April 19, 2024, it was reported that Tamil Nadu had surpassed Karnataka and Uttar Pradesh to become the top state in terms of exporting electronic goods in the fiscal year 2023–2024. It has been noted that the state’s exports increased by 78 percent between 2022–2023 and US$5.37 billion and US$9.56 billion.

Apart from the electronics segment, micro, small, and medium enterprises (MSMEs) also have a heavy presence across a host of industries, such as coir, automobiles, food processing, textiles, footwear, and leather. The manufacturing sector is a big contributor to Tamil Nadu’s GDP, making up more than 40 percent of the total.

Other prominent industries with a substantial presence of MSMEs include healthcare, Information Technology (IT) & IT-enabled services (ITES), leather and textile manufacturing, auto components, electronics, and biotechnology.

Economic profile of Tamil Nadu

Tamil Nadu is one of the leading manufacturing regions in the country, as the sector contributes around one-third to the GDP of the state. The leading industries are automobile manufacturing, textiles, agritech, and electronics parts and equipment.


Four of Tamil Nadu’s major cities, namely—Coimbatore, Tirupur, Salem, and Erode—have contributed to the expansion of the textile sector. While the “cotton town” of Coimbatore is known for its mass cotton production, Tirupur is popularly called the “knit city”. Tamil Nadu accounts for one-third of the textile businesses in India, with 45 percent of the spinning capacity and 10 percent of the handloom capacity.

In an effort to stop losing its competitive edge to other states in the textile manufacturing sector, the state government is offering policy incentives.

In February 2024, the Tamil Nadu government announced its decision to offer a 6 percent interest subsidy for the modernization of the spinning segment, which comes with a budget outlay of INR 5 billion (US$59 million). It is projected that the interest subsidy increase for spinning modernization will lower capital costs and motivate the spinning segment to update its outdated machinery.

Furthermore, in 2023, the special capacity subsidy for technological textiles, MMF (man made fiber) yarn made from recycled materials, MMF fabric, and apparel manufacture in Tamil Nadu was to increase from 15 percent to 25 percent. The need for technical textiles has increased significantly on a global scale since the COVID-19 epidemic, and the production of MMF and recycled products is expected to be the future growth drivers.

Key announcements for the state’s textile sector:

  • Allocation of INR 1.683 billion (US$201.4 million) for Virudhunagar PM MITRA Park, which is expected to generate employment for 200,000 people.
  • An estimated investment of INR 8 billion (US$95.75 million) from Salem Textile Park is expected to generate jobs for 8,000 people.
  • Allotment of INR 250 million (US$29.9 million) to set up the “Research and Business Development Fund for Technical Textiles and Manmade Fiber.”
  • Allotment of INR 250million (US$29.9 million) for apparel clusters in Virudhunagar, Pudukottai, Kanyakumari, Silk cluster in Salem, and the yarn cluster in Namakkal
  • An allotment of INR 200 million (US$23.94 million) for 10 mini textile parks in the districts of Karur, Erode, and Virudhunagar is expected to attract investment and create rural jobs, especially for women in the aforesaid districts.


Tamil Nadu stands out as a hub for manufacturing, hosting the largest number of factories in India, as per a recent RBI study. However, there’s a noticeable uptick in the appeal of Global Capability Centers (GCCs), offshore branches of multinational corporations.

A 2023 EY report forecasts a significant surge in India’s GCC market, projecting it to grow from $45 billion to $110 billion by 2030. Tamil Nadu, with its abundant industries and skilled workforce, is poised to capitalize on this growth.

In January, this year, Saint Gobain, a French glass manufacturer, made its largest investment in Tamil Nadu this year, committing INR 3,400 crore across its various operations in the state, bringing its total investment to nearly INR 8,000 crore. This investment follows similar agreements with companies like Foxconn, Godrej, and Schwing Stetter.

The Tamil Nadu government has received investment proposals worth INR 2.97 trillion (US$35 billion) in the past two years, encompassing both the manufacturing and GCC sectors. The chief minister of state, M.K. Stalin, asserted that the proposed investments, contingent upon the outcome of the first Global Investors Meet (GIM 2024), would span a number of industries, including advanced electronics manufacturing, green energy non-leather footwear, cars and e-vehicles, defense and aerospace, data centers, global capability centers, information technology, and digital services.

According to Tamil Nadu Industries Minister TRB Rajaa, the state’s electronics exports in FY 2023–2024 reached a record-breaking US$9.56 billion. He expressed satisfaction with the sectoral performance and stated that the state is heading for yet another record high in the upcoming year.

Leading global electronics manufacturer, Apple’s iPhones, revealed that it will invest US$500 million in its India division to increase output. After Foxconn and Wistron, Taiwan’s Pegatron opened a production facility in Mahindra World City in Chennai in September 2022. The company invested over INR 11 billion (US$131.8 million) in the facility, which might result in the creation of 14,000 jobs. Pegatron is the third Apple vendor to establish a manufacturing facility in India. The largest manufacturer of mobile phone chargers in the world and a major supplier to Apple Inc., Salcomp, has also revealed intentions to invest about INR 18 billion (US$215.33 million) in its Tamil Nadu business in March 2023.

Automobile manufacturing

In January 2024, the Tamil Nadu Global Investors Meet (GIM) attracted significant investments from global tech, automotive, energy, and manufacturing firms, securing investment of over INR 6.6 trillion (US$79 billion), with a considerable portion earmarked for electric vehicle (EV) development.

Chennai, likened to the ‘Detroit of Asia,’, is known as a renowned automotive manufacturing hub. In recent times, several regions in the state have piqued the interest of EV manufacturers in setting up production units in the state. In 2023, Tamil Nadu accounted for 40 percent of the country’s EV production, manufacturing over 400,000 out of the one million EVs sold nationwide. Notably, the state produced a staggering 68 percent of all EV two-wheelers sold in India.

There have been a slew of new automobile investments announced in Tamil Nadu by prominent players. Vietnamese electric car manufacturer VinFast, for instance, plans to invest US$2 billion in establishing a manufacturing plant in Tamil Nadu. The construction is set to commence in 2024, with an initial investment of US$500 million for the first phase, aiming to create 3500 jobs and produce 150,000 EVs annually.

Tamil Nadu’s venture into the automotive sector traces back to the early 1990s, when India underwent liberalization, and private enterprises began establishing industries.

Ford Motor, in collaboration with Mahindra & Mahindra, established the first car manufacturing facility near Chennai during this period. For three decades, the state has been closely associated with automobile manufacturing, attracting numerous companies to establish their operations there.

Meanwhile, Hyundai Motors has committed INR 61.8 billion (US$739 million) to bolster the EV sector in Tamil Nadu, including the establishment of a ‘Hydrogen Valley Innovation Hub’ to promote green energy. Additionally, Ola Electric plans to invest INR 76 billion (US$909 billion) to construct the world’s largest EV facility spread across 2000 acres, incorporating advanced cell and EV manufacturing facilities, vendor supplier parks, and ancillary ecosystems.

At present, India’s Ather Energy, an EV two-wheeler company, operates two plants in Hosur and aims to expand further. 

According to reports, the state is getting ready to bid on any and all electric vehicle manufacturing chances. Though some consider Tamil Nadu to be the nation’s “automotive capital,” the state is currently working to become known as India’s “EV capital.” Currently, BMW AG, Hyundai Motor, Nissan Motor, and Renault SA have production operations in Tamil Nadu.

Agro-food processing

Tamil Nadu’s agricultural sector benefits from its diverse agro-geoclimatic zones, supporting its prominent position in the industry. With approximately 24,000 SMEs and 1,100 medium and large enterprises involved, the state leverages its strengths: ample agricultural resources, growing demand, and excellent access to both local and global markets.

The region boasts leading production of various agricultural commodities, including rice, maize, sugarcane, mango, banana, turmeric, coconut, groundnut, cashew, tea, coffee, dairy products, eggs, and poultry, among others.

The agro-food processing sector contributes an estimated 15 percent to the state’s economy, with Tamil Nadu consistently surpassing 11 million metric tonnes of food grain production. It also accounts for 7.2 percent of India’s total food processing output and hosts the second-highest number of food processing units.

To further enhance the industry, Tamil Nadu is establishing eight agro-processing clusters and six mega food parks. The ambitious project was first announced in 2020. 

Industrial Policy

The state launched “Industrial Policy 2021” with the aim of attaining an annual growth rate of 15 percent in the industrial sector by 2025 in order to draw investments totaling INR 10 trillion (US$ 137 billion) and create work opportunities for 2 million people. The Tamil Nadu Defence Industrial Corridor (TNDIC), the Chennai-Bengaluru Industrial Corridor (CBID), and the Chennai-Kanyakumari Industrial Corridor (CKID) are the main industrial investment corridors.

The Tamil Nadu Industrial Development Corporation Limited (TIDCO), an industrial development agency of the Tamil Nadu government, was established in 1965. TIDCO seeks to advance medium- and large-scale companies inside the state through joint ventures and is the lead organization for the development of initiatives related to industrial corridors.

Other industrial developmental nodal agencies

State Industries Promotion Corporation of Tamil Nadu (SIPCOT), Tamil Nadu Industrial Investment Corporation Limited (TIIC), and Tamil Nadu Small Industries Development Corporation Limited (TANSIDCO) are jointly developing industrial infrastructure in the state.

Key industrial infrastructure includes:

  • Industrial parks and land bank creation
  • Transport and logistics
  • Energy and utilities
  • IT infrastructure

Focus sectors

Sunrise sectors

  • Automobile and Auto Components
  • Chemicals
  • Electronic Hardware
  • Heavy Engineering
  •  Leather
  • Textiles
  • Financial Services
  •       Software
  • Aerospace and Defense Applications
  • Agro & Food Processing Except Edible Oil Industries
  • Renewable Energy Components Manufacturing
  • Electronics System Design & Manufacturing
  • Medical Electronics, Devices and Equipment
  • Electric Vehicles, EV Cell & Battery Manufacturing or any Green Fuel Technology such as Hydrogen Fuel
  • Biotechnology
  • Pharmaceuticals, Bulk Drugs and Nutraceuticals
  • Petrochemicals and Speciality Chemicals
  • Footwear, Finished Leather Goods and Polyurethane Fabric
  • Technical Textiles Including Medical Textiles

Employment opportunities and skill development measures

In its 2024 state budget, Tamil Nadu announced that a payroll subsidy of 10 percent would be extended for new establishments that hire 500 or more women, physically challenged individuals, and transgender persons who are residents of Tamil Nadu.

Further, new projects such as the development of an IT park in Vilankurichi (Coimbatore), international skill development centers in Coimbatore and Madurai, free Wi-fi at 1000 locations in Coimbatore, Trichy, Madurai, and Salem, and a four-story plug-and-play manufacturing facility with an estimated budget of INR 370 million (US$4.4 million) are expected to generate 1500 jobs in Coimbatore city.

It may be worth noting that, according to data from the 2021–22 Annual Survey of Industries, out of 1.49 million registered women workers in India, 630,000, or 42 percent, were employed in factories in Tamil Nadu.

FDI in Tamil Nadu

The state allows 100 percent foreign direct investment (FDI) in over 30 sectors via automatic route. While one may not need prior approval; the state guidelines specify that the investment must be notified to the apex monetary body of the country, the Reserve Bank of India (RBI), within 30 days of inward remittances or the issue of shares to non-residents.




Plantation Sector

Mining and Exploration of metal and nonmetal ores

Mining – Coal & Lignite


Broadcasting Carriage Services ( Teleports, DTH, Cable Networks, Mobile TV, HITS)

Broadcasting Content Service – Up-linking of

Non-‘News & Current Affairs’ TV Channels/

Down-linking of TV Channels

Airports – Greenfield

Airports – Brownfield

Air Transport Service – Non-Scheduled

Air Transport Service – Helicopter Services/Seaplane Services

Other services under Civil Aviation Sector – Ground Handling Services

Other services under Civil Aviation Sector – Maintenance and Repair organizations; flying training institutes; and technical training institutions

Construction Development

Industrial Parks -new and existing

Trading – Wholesale

Trading –E-commerce activities

Trading – SBRT

Duty Free Shops

Railway Infrastructure*

Asset Reconstruction Companies

Credit Information Companies

Intermediaries or Insurance Intermediaries

White Label ATM Operations

Other Financial Services

Pharmaceuticals – Greenfield

Petroleum & Natural Gas – Exploration activities of oil and natural gas fields


Petroleum refining by PSUs

Infrastructure company in the securities market



Power Exchanges


FDI incentives under state industrial policy

The Tamil Nadu Industrial Policy, 2021, also specifies provisions to avail benefits. The salient features are as follows: 


– SGST Reimbursement: 100 percent reimbursement of SGST paid on the sale of final products manufactured, sold, and registered within the state for a duration of 15 years.

– Fixed Capital Subsidy: Capital subsidy of up to 25 percent dispersed over a maximum period of 15 years, depending on project location and category. Large projects in category A districts (Chengalpattu , Chennai, Kancheepuram and Tiruvallur) will receive a back-ended capital subsidy of INR 10 million (US$119,700).

– Flexible Capital Subsidy: Capital subsidy of up to 35 percent of Eligible Fixed Assets (EFA) for A districts, 37 percent for category B districts (Coimbatore, Erode, Karur, Krishnagiri, Namakkal, The Nilgiris , Ranipet, Salem, Tiruchirappalli, Tirupattur, Tiruppur, and Vellore), and 40 percent of EFA for category C districts (Ariyalur, Cuddalore, Dharmapuri, Dindigul, Kallakurichi, Kanniyakumari, Madurai, Mayiladuthurai, Nagapattinam, Perambulur, Pudukkottai, Ramanathapuram, Sivagangai, Tenkasi, Thanjavur, Theni, Thiruvarur, Thoothukudi, Tirunelveli, Tiruvannamalai, Villupuram and Virudhunagar), distributed over 2.5 times the investment period.

– Turnover Based Subsidy: Up to 2 percent of yearly turnover for mega/ultra-mega projects generating more than 2000 jobs for 10 years.

Other subsidies and benefits:

– Investment Promotion Subsidy: Up to 40 percent of EFA.

– Logistics Parks Industry Status: Logistics parks will receive industry status with relaxation on non-processing areas.

– Imported Machinery: Both new and second-hand machinery can be considered as Eligible Fixed Assets.

– Transport Subsidy: 75 percent of relocation costs of capital goods, capped at INR 100 million (US$1.97 million).

– Land Cost Subsidy: Eligible projects in SIPCOT in A & B districts will be offered land at a 10 percent concessional rate, and at a 50 percent concessional rate in C districts for land up to 20 percent of EFA.

– R&D Training Incentive: INR 10,000 (US$119.7) per person per month for a duration of 12 months.

– Standard Incentives & SGST Refund on Capital Goods: Firms with inverted tax structures will also qualify for standard incentives and SGST refund on capital goods. 

Policies and schemes in Tamil Nadu to support businesses

Tamil Nadu Semiconductor and Advanced Electronics Policy 2024

Tamil Nadu Ethanol Blending Policy 2023

Special Scheme for Technical Textiles, MMF Yarn from Recycled Products, and MMF Fabric & Apparel Manufacturing (2023)

Tamil Nadu City Gas Distribution Plan 2023

Tamil Nadu Logistics Policy & Integrated Logistics Plan 2023

Tamil Nadu M-Sand Policy 2023

TN Electric Vehicles Policy 2023

Tamil Nadu Aerospace & Defence Industrial Policy 2022

Tamil Nadu R&D Policy 2022

Tamil Nadu Lifesciences Promotion Policy 2022

Tamil Nadu Footwear & Leather Products Policy 2022

Tamil Nadu FinTech Policy 2021

Tamil Nadu Data Centre Policy 2021

TN Export Promotion Strategy 2021

Tamil Nadu Startup & Innovation Policy 2018-23

Tamil Nadu Electronics Hardware Policy 2020

Tamil Nadu Solar Energy Policy 2019

Tamil Nadu Electric Vehicle Policy 2019

Tamil Nadu Food Processing Policy 2018

Tamil Nadu Automobile and Auto Parts Policy 2014

Tamil Nadu Biotechnology Policy 2014

Tamil Nadu Export Strategy 2014

Ease of doing business in Tamil Nadu

Tamil Nadu boasts quality infrastructure, connectivity, and a skilled workforce. It has also undertaken numerous steps to improve the business climate under the “Ease of Doing Business” (EoDB) Initiative.

The Tamil Nadu Single Window Portal, launched in 2021, is viewed by many country analysts as an investment game changer. It is a one-stop portal for investors to electronically secure all business-related approvals/ licenses/ clearances/ NOCs in a time-bound, yet hassle-free manner in Tamil Nadu. This covers over 200 services covering 40+ government departments/ agencies.

Single window fee slab for large industries

S. no.

Investment limits of enterprises

Fee payable to the state level nodal agency

Lump sum fee for all single window clearances / services (in rupees)

Fee for each clearance / service offered through single window portal

Pre-establishment or pre-operation stage clearance / service and incentive – upto 5 clearances / services (in Rupees)

Renewal stage clearance / service or any other post-operation stage clearance / service (in Rupees)


Expansion of an enterprise (other than MSME) with additional investment up to INR 100 million





Expansion of an enterprise (other than MSME) with additional investment of more than INR 100 million up to INR 500 million





Establishment or expansion of an enterprise with investment of more than INR 500 million and up to INR 1 billion.





Establishment or expansion of an enterprise with investment of more than INR 1 billion and up to INR 3 billion





Establishment or expansion of an enterprise with investment of more than INR 3 billion and up to INR10 billion.





Establishment or Expansion of an enterprise with investment above INR10 billion





Tamil Nadu’s government is successfully attracting FDI in key industrial sectors due to its streamlined business environment and handholding by state agencies. Major sectors like textiles and automobiles have well-established networks of MSME suppliers, including OEM and ODM players, that support top manufacturing firms. The state has revised its policies to boost investment appeal in areas where the state is losing its competitive advantage to other Indian states or foreign hubs.

A recent ambition is becoming the EV manufacturing capital of the country. The state offers lucrative policies, such as tariff reductions for EV charging stations, which may facilitate the proliferation of EV stations, thereby encouraging EV adoption. The Vietnamese EV brand VinFast has just begun setting up its factory here.

Overall, the industrial ecosystem in Tamil Nadu offers plenty of scope for foreign players to set up production plants, implement diversity hiring, explore local sourcing or JV partners, or invest in R&D aligned with India’s sustainability and technology ambitions.

(With inputs from Melissa Cyrill.)

This article was originally published April 18, 2024. It was last updated April 22, 2024.

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