In Tamil Nadu, the electoral triumph of the C. Joseph Vijay-led Tamilaga Vettri Kazhagam (TVK) is seen as something that would lead to a departure from the “Dravidian Model of Development”. But only time will tell if Mr. Vijay’s victory is just an extension of Dravidian politics. According to TVK’s election program, there is room for continuity, not interruption, from existing economic policy. The party’s victory comes at a time when Tamil Nadu is facing a number of challenges. While some are internal, arising from gaps in the state’s relatively better developmental outcomes and political trajectory, others have been exacerbated by external problems such as shifts in federal relations and changes in the global economic order.
Successive Dravidian parties have built an economy that is inclusive, productive and broad-based. The state has shown that economic growth can go hand in hand with social development: simultaneous interventions in the drivers of growth (infrastructure such as energy and transport) along with investments in affordable healthcare and education. It may not be an exaggeration to say that even without parental support, the probability of a child surviving, being fully immunized, being fed nutritious food, going to school, entering college and going to university is much higher in Tamil Nadu than in many other states in India (perhaps Kerala being the other).
But now, “there’s trouble in paradise.” New fault lines have appeared in the Dravidian model. Historically, Tamil Nadu’s industrial story has been based on a simple idea: using state policy to bring together the growth of territorially rooted micro, small and medium enterprises (MSMEs) and large electronics and manufacturing firms to spread learning, jobs and value creation across regions in the state. This model has weakened with the rise of precarious jobs and slow wage growth. Growth – and indeed continued growth – did not create jobs or increase real wages. Even the subsequent transfers of social benefits did not take away from it. Not to mention that increased social transfers came at the expense of fiscal prudence.
Jobs and growth
Tamil Nadu is a global manufacturing hub and its industrial policy, irrespective of the political regime, has remained consistent and uncontroversial. In the past, it therefore attracted major global investments such as Hyundai, Ford and Nokia, and Foxconn, which manufactures the Apple iPhone. However, there is a gap between promised and realized investment. According to the Center for Monitoring the Indian Economy Pvt. Ltd (CMIE) data during 2021-25 reported that investments rose to ₹ 6.80 crore, but completed investments were lower at ₹ 1.57 crore. The completion ratio is 23.09%, which is lower than before. Even these investments did not create adequate jobs. The employment elasticity of new jobs is now much lower than under previous regimes: 0.01 per unit of pledged capital, less than one job per million invested. The latest annual industry survey tells us that the ratio of jobs created per unit of capital investment, the number of workers to gross capital formation, was 0.58 for Tamil Nadu, 0.34 for Gujarat and 0.33 for Maharashtra. Historically, Tamil Nadu’s uniqueness lies in its pursuit of development that delicately balances the needs of capital with the required degree of safeguards for workers. As a result, even as the share of wages in national income declined worldwide due to increases in capital intensity, Tamil Nadu was able to protect its workers, at least relatively.
The level of wages in Tamil Nadu was higher due to the lower level of contractual relationship and better bargaining power of labour. Compared to its own past, the state is now witnessing increasing contracting, a falling wage share, and a weakening elasticity of employment with rising capital intensity. MSMEs are losing ground and many traditional clusters with a high proportion of human labor are facing a crisis of survival. They have yet to fully recover from the aftershocks of demonetisation (2016), GST (2017) and COVID-19 (2020). US President Donald Trump’s tariffs have exacerbated the crisis. The new factories that have come in have weak ties to the existing small firms. On the other hand, the persistent skills gap in the labor market further limits the ability to create jobs, adopt new technologies and absorb new entrants.
Aspiration versus achievement
The Dravidian model, which raised aspirations among the youth, brought new difficulties. Her emphasis on education as a path to self-respect translated into broad-based aspirations for success, which implied dignity and self-respect. These are the values on which the Dravidian movement has stood for a long time. Tamil Nadu is one of the few states in India that has democratized higher education and addressed elite bias. Its Gross Enrollment Rate (GER) in higher education is 51%, meaning that 51% of all young people in the 18-23 age group are in some form of higher education, double the national average of 27.1% and comparable to most European countries. It is also inclusive as the GER for Scheduled Caste (SC) males and females is 38.8% and 40.4% respectively, which is much higher than that of upper caste youth in many states.
“There must be a new set of economic and social policies that will pay attention to these fault lines” | Photo credit: AFP
But since education has expanded without improving quality, its returns have fallen, weakening prospects for mobility and opening new avenues for inequality. With the decoupling of education from the labor market, the relative position of first-generation graduates compared to those with generational wealth is increasingly fragile. Double-digit growth means nothing to newcomers if it doesn’t create jobs with matching wages. Educated youth work as delivery and gig workers who are exploited by platform companies. There was a feeling of betrayal. The prosperity that follows is not enough and cannot compensate for the loss of dignity suffered by unemployment or informality. The Dravida Munnetra Kazhagam Party’s new welfarism provided a vast social and economic safety net for the disadvantaged, but these social measures did not resonate with primary voters in 2026. In the absence of meaningful employment, youth perceive them as measures that take away dignity.
New policies providing dignity
There is no doubt that Tamil Nadu still performs better than other states in most indicators. It is a matter of course for the youth. They have been listening to this narrative all their lives, but the slogan of success does not resonate with their lives. The Dravidian movement has taken over the old hierarchy but is blind to the new hierarchy and its own position within it. Thomas Piketty points out that apart from political equality, voice, power and participation and access to basic goods for everyone, the most serious form of inequality in our time is the question of dignity. Tamil Nadu has achieved some degree of equality in basic health, education, food and transport through a more generous welfare state. But it did not bring dignity. So how does one even do it?
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The solution to this problem requires a re-engineering of the growth strategy to generate decent jobs, better wages and governance reform to reduce the gap between the governed and the governed, promote community life among the people and eliminate new places of hierarchy. Without these measures, even welfare, framed in the language of rights, may not work, because the line between legitimate welfare and illegitimate bribery, or money for votes, blurs. This often leaves young people upset or confused about what an entitlement is and whether a cash transfer is a right or a bribe. A new set of economic and social policies is therefore required that will pay attention to these fault lines.
Kalaiyarasan A. is Associate Professor, Madras Institute of Development Studies
Published – 13 May 2026 0:16 IST
