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Economy of South India

Category: Economics

Post India's independence in 1947, the economy of South India was shaped by following a socialist model. In line with this, the government exercised strict control over private sector involvement, foreign trade and foreign direct investment (FDI).

Economic Growth and Development

Throughout the period of 1960-1990, the economies of South India witnessed varied growth patterns. For instance, in the 1960s, Kerala surpassed the average economic growth, while Andhra Pradesh experienced a decline. On the contrary, in the 1970s, Kerala saw an economic downturn, while Tamil Nadu, Andhra Pradesh, and Karnataka consistently outperformed the national average growth rates.

Since the 1980s, South India started excelling economically in comparison to the rest of India. States like Andhra Pradesh, Tamil Nadu and Karnataka were recognized for being more reform-oriented in their economic policies. Over the last decade, the region has grown at an annual rate of 8%. However, future economic expansion might be restricted due to a comparatively lower active age population proportion against the number of dependents.

Current Status and Projections

Currently, South India constitutes about 20% of India's total population and contributes around 31% of India's Gross Domestic Product (GDP). This contribution is expected to rise to 35% by the year 2030.

Role of Agriculture and Industry

Agriculture plays a significant role in South India with over 48% of the population engaged in it. The agricultural sector heavily relies on seasonal monsoons. A wide variety of crops are cultivated here, including paddy, sorghum, pearl millet, pulses, sugarcane, cotton, chilli, and ragi. Additionally, the hilly regions grow areca, coffee, tea, vanilla, rubber, pepper, tapioca, and cardamom, while coastal areas abundantly produce coconuts.

South India is also the most industrialized region in India, with Bangalore being regarded as the IT Hub of the country and hosting the highest number of software companies nationwide. Information Technology is a budding sector in this region, and Bangalore alone is home to around 200 software companies. Furthermore, three of India's top software exporters - Bangalore, Chennai and Hyderabad - are situated in South India. These cities play an essential role in shaping the economic and technological landscape of the region.

Overview of Andhra Pradesh's Economy

Andhra Pradesh, an Indian state, shows significant expertise in both the industrial and services sectors. To be specific, Visakhapatnam district serves as the hub for these sectors where the industrial sector saw an impressive return of ₹17,598 crore (US$2.1 billion), and the services sector generated an even larger figure of ₹31,372 crore (US$3.8 billion).

According to data from 2014-15, the per capita income of this state summed up to $1,780.47.

Agriculture

Agriculture plays a vital role in Andhra Pradesh's economy. The state's geographical privilege of having two major Indian rivers, the Godavari and Krishna, results in fertile lands and productive farming conditions.

Andhra Pradesh notably produces a significant portion of India's rice supplies, earning it the nickname, "Rice Bowl of India."

Poultry Industry

The state also excels in the poultry industry, greatly contributing to the overall economy. It leads in egg production across the Asian continent, thus branded as the "Egg Bowl of Asia."

Technology sector

Moreover, Andhra Pradesh has made significant strides in the fields of Information Technology (IT) and Biotechnology. Cities like Visakhapatnam and Vijayawada have demonstrated noticeable growth in IT exports.

For instance, in 2012-13, Visakhapatnam contributed ₹1,445 crore (US$170 million) to the IT sector, while Vijayawada pitched in with ₹115.26 crore (US$14 million).

Gross State Domestic Product (GSDP)

The Ministry of Statistics and Programme Implementation (MOSPI) tracks the trend of the state's gross domestic product at market prices. As per their recordings, Andhra Pradesh ranks fourth among major Indian states, both in terms of overall GSDP and per capita GSDP.

Conclusion

In a nutshell, across various economic sectors, Andhra Pradesh demonstrates robust performance and plays a significant role in contributing to India's economy. As per the available figures, Visakhapatnam district takes the lead in industrial and service sectors, and the state is recognized worldwide for its prowess in agricultural and poultry sectors. With its increasing focus on IT and Biotech industries, Andhra Pradesh is emerging as a diversified and strong regional economy in India.

Overview of Karnataka's Economy

Gross State Domestic Product

Karnataka's Gross State Domestic Product (GSDP) stands at a staggering $47 billion, making it a significant player in India's economy. A range of cities in Karnataka contribute to this high GDP, with major contributors being Bengaluru, Mysuru, Mangaluru and Hubballi-Dharwad. Additional contributions are made by Belagavi and Kalaburagi.

Foreign Direct Investment

Between 1992 and 2002, Karnataka stood fourth in Indian states receiving maximum Foreign Direct Investment (FDI), amounting to INR. 21,566 million. This signifies foreign investors' interest in the state due to its robust economic activities.

Contribution to IT sector

Karnataka holds a pivotal position in India's Information Technology (IT) sector, accounting for one-third of the country's IT exports. For the year 2006, it was expected to generate a remarkable 37% of all IT revenues, equating to INR. 370 billion ($8.2 billion). The state is also a technological hub, boasting 35% of India's IT enterprises and 40% of its biotech companies.

Agriculture

Agriculture in Karnataka, as in most parts of India, forms the livelihood for 80% of the population. Agriculture and related activities account for 49% of the state's income. The coastal plains, including Uttara Kannada and Dakshina Kannada, are known for rice and sugarcane cultivation.

Plantations

The picturesque slopes of the Western Ghats in the Kodagu, Chikkamagaluru, and Hassan are renowned for coffee and tea plantation. Karnataka produces a significant 70% of India's coffee, with about 50% of it fetching good export revenue.

Cotton and Cereal Cultivation

The fertility of the black soil in the northwestern belt of the state is congenial for growing cotton, onion, coarse cereal, sunflower, and peanuts.

Forest Produce

The lush greens of the Malenadu forests yield valuable timber, bamboo and sandalwood. Sandalwood oil produced in Karnataka enjoys priority in the global market, making Karnataka the sole sandalwood exporter in India.

Mineral Wealth and Ore Production

Karnataka boasts a wealth of minerals, which make up the bulk of raw materials required for iron and steel industries located within the state, such as the one in Bhadravati. The state's Malnad region is the sole provider of iron ore throughout India.

Gold Production

India's entire gold supply comes from the Kolar district of Karnataka, illustrating the state's notable contribution to the country's bullion wealth.

Power Generation

Karnataka set up Asia's first power station in Shivanasamudra in 1902. The state currently houses 18 power stations, which collectively generate an impressive 16,513 million units annually. Despite this, Karnataka battles power adequacy issues, necessitating electricity purchases from its neighboring states.

Thus, Karnataka's multi-faceted economy, spanning across IT, Agri and Non-Agri, and Industrial sectors, showcases its noteworthy contribution to India's GDP.

Mangalore: A Flourishing Business Centre in India

Mangalore is one of the largest and fastest-growing cities in India, right after Bangalore, making it a top location for businesses. It also prides itself in being the biggest city in the Coastal and Malnad regions of Karnataka, comprising the West Coast's leading hub for commercial, industrial, educational, healthcare, and petrochemical sectors. It is one of the rare cities in India to possess both a major port and an international airport.

Noteworthy Businesses and Industrial Areas

Major enterprises in Mangalore include industrial giants like Mangalore Chemicals and Fertilizers Ltd (MCF), Kudremukh Iron Ore Company Ltd (KIOCL), Mangalore Refinery and Petrochemicals Ltd (MRPL), BASF, Bharati Shipyard Limited, and TotalEnergies India Limited. The city also houses Karnataka's second-biggest industrial area, Baikampady. Mangalore's economy is mainly composed of industrial, commercial, agricultural processing and port-related activities, which are reflected in the growth of the real estate industry in the city.

The New Mangalore Port, India's seventh largest in terms of cargo handling, significantly contributes to the city's industrial growth, handling 75% of India’s coffee exports and most of its cashew nuts.

Special Economic Zones and IT Parks

Mangalore is home to one of India's largest Special Economic Zones (SEZ), the Oil and Natural Gas Commission (ONGC) MSEZ. The SEZ atmosphere has also attracted the attention of the information technology (IT) sector. The city already has Soorya IT Park and plans are underway to develop three dedicated IT parks, two of which, Export Promotion Industrial Park (EPIP) at Ganjimutt and SEZ near Mangalore University, are currently under construction. Another proposal for a third IT SEZ in Ganjimutt is being discussed while an ongoing IT SEZ project, sponsored by the BA Group in Thumbe, spans an area of 2 million square feet.

Major IT and outsourcing firms such as Infosys, Cognizant Technology Solutions, MphasiS BPO, Thomson Reuters, and Endurance International Group have established their presence in Mangalore. The growth of these industries highlights the city's potential as an emerging IT hub.

Future Developments and Investments

A promising future development is ONGC's plan to invest over ₹35000 crore (US$5.15 billion) in a new 15-million-tonne refinery, petrochemical plant, power and liquefied natural gas (LNG) plants at the Mangalore Special Economic Zone.

The Indian Strategic Petroleum Reserves Ltd, a special purpose vehicle under the Oil Industry Development Board, aims to develop strategic crude oil reserves at three places in India including Mangalore. Out of the proposed 5 million metric tonnes (MMT) storage, Mangalore will have a share of 1.5 MMT.

Banking Sector and Improved Connectivity

Mangalore is home to three nationalised banks: Corporation Bank, Canara Bank, and Vijaya Bank, established during the early 20th century. The city also has a prominent non-nationalized bank, Karnataka Bank, and scheduled banks like the Mangalore Catholic Co-operative Bank (MCC Bank) Ltd. and SCDCC Bank.

Mangalore's excellent roadways (4 National Highways), railways, waterways, and airways significantly enhance its connectivity across South India, providing a strong business infrastructure.

Education and Software Industry

Mangalore is noted for its National Institute of Technology, part of a group of premier public technical universities in India. Nearby, Udupi is another education hub where a large number of professional colleges are located in Manipal.

The city is also home to Robosoft Technologies, contributing to the growing software industry. This diversification of the economy from conventional industries into IT and education denotes Mangalore's nature as a fast-growing non-metro city in South India.

Kerala: A Service-Based Economy

Kerala is a prime example of an economy primarily based on services. Based on a report from Niti Aayog, an influential Indian government think-tank, Kerala has earned its rank as the top state in India for investment, surpassing other states in terms of the Human Development Index (a measure of achievement in key dimensions of human development) and the living standards of its residents. In some aspects, Kerala's level of development mirrors that of more developed nations, leading experts to dub this the "Kerala Phenomenon" or the Kerala model of development.

Social Welfare and Economic Progress

Kerala operates a mixed economy, combining capitalist and welfare-driven elements. A significant emphasis is placed on social welfare in Kerala, which, while enhancing the quality of life, has also inhibited rapid economic advancement. Despite having a small number of key industries, the state's GDP per person is greater than India's average.

The Role of Remittances

Financial remittances from Keralite workers living and working abroad, particularly in the Middle East, constitute a significant part of Kerala's GDP. This pattern of remittances greatly contributes to the state's higher-than-average GDP per capita.

Emergence as a Future IT Hub

Kerala has the potential to become a future IT hub in India due to its excellent Internet connectivity - with undersea cable landing points in Kochi - and its workforce's skills. The state government has established three information technology parks: Technopark in Trivandrum, Infopark in Kochi, and Cyberpark in Calicut. Technopark, at Trivandrum, is among the largest IT parks in Asia and India's largest. Besides Infopark in Kochi, another IT park named Smartcity, backed by Dubai Internet City, is under construction.

Prominent Ports

Kochi, a significant Indian port, boasts a natural harbour and is regarded as one of the country's most crucial ports. A new International Container Transshipment Terminal has been established at Vallarpadam, which is predicted to act as a crucial Indian transshipment port. Furthermore, work is being undertaken on the proposed mega Deep Water Container Transshipment Port at Vizhinjam near Trivandrum, which is expected to give a boost to Kerala's economy.

Grossing in Agriculture

Agriculture, a significant part of Kerala's economy, includes widespread cultivation of coconut, tea, coffee, rubber, cashew and a variety of spices such as pepper, cardamom, vanilla, cinnamon, and nutmeg. Much of the state's agriculture operates in the form of home gardens. Despite the state's progression towards becoming a technology hub, agriculture plays a crucial role in supporting the rural economy and in feeding the city dwellers.

Unemployment in Kerala

Unemployment has always been a significant issue in Kerala. However, according to research conducted by the Centre for Development Studies in Trivandrum, the rate of unemployment has recently declined to 9%. This improvement is partially due to the scope of employment opportunities available in various sectors.

Employment in Cottage Industries

Many individuals in Kerala earn their living through labor-intensive cottage industries. A large number of these workers are engaged in traditional low-income activities such as processing coconut fibre and cashews or weaving. These industries, although they pay low wages, provide much-needed jobs for the local population.

Service Sector Employment

Over half of Kerala's workforce is engaged in the service sector. This sector, which includes professions such as retail, banking, and healthcare, provides numerous job opportunities for the state's population.

Prominence of Kerala in Ship Building And Aviation

Kerala boasts one of India's major shipbuilding yards, located in the city of Kochi. Apart from contributing towards the state's economy, it also provides employment opportunities.

Kerala has significant strategic importance due to the presence of the Southern Naval Command's headquarters in Kochi, and the Southern Air Command's base in Thiruvananthapuram (Trivandrum).

In terms of aviation, Kerala has four international airports: Trivandrum, Cochin, Kozhikode, and Kannur. Cochin International Airport holds the distinction of being India's first International Airport that was built with private participation, without funding from the Central Government.

Kerala as Tourist Hub

Kerala is an internationally acclaimed tourist destination, adding to its economy and employment quotient. National Geographic Traveller listed Kerala as one of the ten paradises on earth, reflecting its global recognition.

The state has been awarded numerous accolades for its ecotourism initiatives. These initiatives not only help to preserve Kerala's rich biodiversity but also boost the local economy by attracting tourists from around the world.

In conclusion, although Kerala faces unemployment issues, its traditional industries, service sector, and strategic importance in shipbuilding and aviation, along with thriving tourism industry, sustain its economy and provide job opportunities for the populace. It remains a significant contributor to India's varied economic landscape.

Understanding the Prosperity of Tamil Nadu

Tamil Nadu is home to the second-largest economy in India, ranking just behind Maharashtra. The Gross State Domestic Product (GSDP) of this southern state is a colossal ₹2,134,395 crore (equivalent to ₹25 trillion or US$300 billion in 2023). With a GDP per capita of $3,000, the state stands fourth among all Indian states. Tamil Nadu is India's second-most industrialized state, with Maharashtra again as the front-runner.

Capturing Major Financial Contributions

In terms of per capita income, Tamil Nadu holds the second position among large states, as per the 2017-2018 statistics. Foreign direct investment (FDI) is a major contributor to the economy, with Tamil Nadu ranking third in FDI approvals (cumulative 1991–2002) of ₹22,582.6 crore (US$2.7 billion), behind Maharashtra (₹33,602.4 crore or US$4.0 billion) and Delhi (₹30,303.8 crore or US$3.6 billion). The state contributes 9.12% of all FDI in India.

As per the 2001 Census, Tamil Nadu showcases the highest level of urbanisation (43.86%) in the country, comprising 6% of India's total population and 9.6% of the urban population.

Industrial Hub and Manufacturing Powerhouse

Chennai, the capital city, hosts a colossal amount of automobile manufacturing, including over 65% of the heavy vehicles produced in the country. Given its dominance in this sector, Chennai is often hailed as the "Detroit of Asia".

Coimbatore or the "Cotton City" or "Manchester of South India" generates 35% of India's cotton yarn. Arni is a significant hub for raw silk production in India. Other leading cities include Vellore for leather processing, Erode for turmeric and textile products, and Tirupur for cotton vests and inners. Karur holds the title as India's leading hub for home textiles production, and Gobichettipalayam is a top producer of white silk. Furthermore, the Salem Steel Plant (SSP), a unit of Steel Authority of India Limited (SAIL), is an essential contributor to India's stainless steel production.

IT Sector, Biovalleys and More

Tamil Nadu houses the most significant number of engineering institutions in India. Being the second leading software exporter in India, Chennai has claimed titles like the Gateway of South India, the Health Capital of India, and the Banking Capital of India.

In addition to IT sector growth, Tamil Nadu facilitates a range of industrial parks. About 110 industrial parks/estates offer developed plots with supporting infrastructure. The Government promotes Rubber Park, Apparel Parks, Floriculture Park, TICEL Park for Biotechnology, Siruseri IT Park, Agro Export Zones, among others.

Energy and Transportation

In terms of energy, 55% of wind power produced in India comes from Tamil Nadu. Kalpakkam nuclear power plant, Neyveli Lignite Corporation, and Narimanam natural gas plants also invigorate the nation's fuel and energy scene.

Transportation is equally pivotal for Tamil Nadu's economy with Koyambedu Bus Stand, operated by CMDA, being Asia's largest bus stand equipped with a global positioning system to track vehicles.

A spectrum of industries

Other notable sectors encompassing the state's financial landscape pertain to textile factories, automobile parts manufacturers, health care facilities, engineering firms, educational institutions, wet grinders and water pumps in Coimbatore. The leader in printing, fireworks, safety matches production in India - Sivakasi contributes 80% of India's total safety matches production and 90% of India's total fireworks production. Thoothukudi is a gateway to the state and houses many chemical industries. Further, Biotechnology Incubator Park, Women's Biotechnology Park, Medicinal Plants Biotechnology Park, Marine Biotechnology Park, and the Bioinformatics and Genomics Centre (BGC) are some of the essential biovalleys of Tamil Nadu.

In the context of engineering equipment manufacturing, Tiruchirappalli holds a significant share. The Golden Rock Railway Workshop, moved to Tiruchirappalli from Nagapattinam in 1928, is one of the three railway workshop–cum–production unit in Tamil Nadu.

In summary, Tamil Nadu's economy is a diverse ecosystem, spanning various industries and sectors. Its dominant economic standing is a testament to India's growth and development.

Introduction

The Indian economy is the world's fifth-largest by nominal GDP and the third-largest by purchasing power parity (PPP). According to the International Monetary Fund (IMF), India's per capita GDP (nominal) was $3,200 as of 2021. Here, we should provide an overview of the key economic and demographic indicators for the Southern states of India in comparison to the national figures. The parameters that are focused on include Per capita net state domestic product (SDP), Foreign Direct Investment (FDI), growth of SDP, poverty, urbanization, residential electrification, and literacy rate.

State Domestic Product

Per capita net State Domestic Product (SDP) is an important economic parameter which indicates the economic prosperity and living standards in a particular region. The southern states of India, on average, have a higher per capita SDP (₹234712.16 / US$3,200) compared to the national average (₹162416.60 / US$2,191). This signifies a higher standard of living and better economic conditions in the southern states.

Foreign Direct Investment

FDI inflows are significant as they add both capital and entrepreneurial skills to the economy. The southern states have attracted a higher percentage of total FDI approved during the period 1993-2003 (5.48%) compared to the national share (4.12%).

State Domestic Product Growth

The average annual growth of SDP in the southern states (5.6%) has been higher than the national average (3.6%). Higher growth rates indicate a well-performing economy and positive economic development and progress.

Poverty

The percentage of the population below the poverty line provides insight into the extent of poverty in the region. The southern states have a lower poverty rate (15.41%) compared to the national average (29.1%), signifying better economic conditions and lower levels of poverty.

Urbanisation

Urbanisation, as measured by the percentage of urban population, is higher in southern states (35.82%) when compared to the national average (23.81%). This implies that the southern states are more advanced in terms of urban development and infrastructure compared to the overall country.

Electrification

The presence of electricity in households indicates the availability and accessibility of basic amenities. Southern states show a higher level of electrification with 98.91% of households having an electricity connection against the national average of 67.4%.

Literacy

Literacy forms the backbone of a well-developed society and economy. The southern states show a higher literacy rate (82.87%) when compared to national literacy rate (75%).

In conclusion, it appears that the southern states of India are doing better than the national average across a variety of indicators over the period under review, reflecting its unique socio-economic dynamics and growth.

Understanding Economic Indicators of Indian States

Economic indicators are crucial as they provide vital information about the economic condition of a state or a country. These indicators are usually related to critical factors such as Per Capita Income, Gross State Domestic Product, and so forth.

Per Capita Income

Per Capita Income (PCI) is used to measure the average income earned per person in a certain area in a specific time period. It's calculated by dividing the area's total income by its total population.

For the financial year 2019–2020, Per Capita Income of several Southern states of India is as follows:

Meanwhile, the all-India average PCI stood at around USD 1,884.98. PCI is an essential indicator as it shows the standard of living in different states and also helps compare the economic wellbeing across different regions.

Gross State Domestic Product

Gross State Domestic Product (GSDP) is the sum of all value added by industries within each state's borders and serves as a counterpart to the national Gross Domestic Product (GDP). GSDP at current prices for different southern states of India for 2019–2020 is as follows:

These southern states together amounted to around ₹65.66 lakh crore or USD 940 billion. In comparison, the all-India figures stood at approximately ₹209.19 lakh crore or USD 3.4 trillion.

In the context of the Indian economy, the above figures are assessed and calculated by relevant financial institutions, such as Reserve Bank of India (RBI), and Ministry of Statistics and Programme Implementation (MoSPI). These entities regularly examine different economic indicators to determine the fiscal health of different states and the country as a whole, which then inform the government's policy decisions.

Knowing both PCI and GSDP helps us understand the economic spectrum of various states. These figures are also vital from the policy-making point of view as they help the government identify areas that need more financial attention in terms of development projects or social welfare schemes. Furthermore, these economic indicators help establish investment attractiveness of different regions, thereby influencing investment decisions by businesses, both domestic and international.