SCERT

10TH ECONOMY Learn from the Experienced

Unit-5

Industrial Clusters In TamilNadu

Introduction

1. Any Human activity which engaged in conversion of raw material into ready usable
material is called an industry
2. Industrialization refers to process of using modern techniques for production and it is
used for both consumers and producers
Importance of industrialisation
1. The share of agriculture in Economy's income and employment decreases with
development
2. Firstly, Demand for food remains constant with regard to income
3. An economy grows and income increases, consumers tend to spend a lesser share
of their income on agricultural Products
4. Secondly, the food that is consumed is subject to more transformation as an
economy expands and there is a greater division of labour between people and
between regions
5. Food products are taken over longer distances, processed and branded
6. As a result farmers get less price compared to the price at which consumers buy
7. Thirdly, The limits at which the ability of agriculture to absorb labour is declining
due to decline in marginal productivity of land
8. Labour productivity in agriculture sector cannot be increased in turn wages cannot be
increased, which result to poverty
9. Hence there need a base to diversify away from agriculture

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10. In development economics there needs a structural transformation and diversification

through industrialisation therefore it is seen as important foreign economy's
development
What Benefits does industrialisation bring to an economy?
1. Even agriculture requires inputs from industry such as fertilizers and tractors to
increase productivity
2. Market exists for both producers and consumer goods, even services like banking,
transport and trade are dependent on production of industrial goods
3. By using modern technology and methods industries can contribute better productivity
in lower cost, so products can be bought at cheaper rate hence it increase the
demand
4. Expansion of production absorbs the labour force coming out of agriculture,
employment generation is therefore an important objective of industrialisation
5. By using modern technology when we produce more products which results more
labour productivity which can help workers to get higher wages
6. When income expands, demand for goods and services will increase, and the surplus
products can be exported, it’s all can be done by industrialisation, which leads to
generate more foreign exchange

Types of industries
Industries are classified on basis of users, types of outputs used, ownership and size
Users
1. if the output is consumed by the final consumer it is called the consumer good
sector

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2. If the output is consumed by another producer it is called as a capital good sector

3. Some industries that produce raw materials for other industries such a cement and
steel such industries are called basic goods industries
Types of inputs used
1. Industries are classified based on the kind of raw material used such as Agro
processing, textile sector, rubber products, leather products ect
Ownership
2. Firms maybe owned by private, public, jointly owned by the private and public sector
or cooperatively owned
Size
1. The size of the firm maybe large small or medium based on their volume of output
sales or employment or on the basis of the amount of investment made
2. Indian government use investment criterion to decide whether the firm is small
medium or large, government provides financial, infrastructural or subsidy support to
the smaller firms in order to promote them
The small sectors are seen as important for two reasons
a. It generates more employment
b. Large number of entrepreneurs from less privileged background
1. 1980s it was believed that large firms are more efficient than the smaller firms
2. Now it is believed that small firms when specialising in one Sector are
Geographically concentrated in specific location and link to another one through
production and learning
3. They tend to be equally if not more efficient than large scale Enterprises
4. They are called as industrial clusters
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Industrial clusters
1. Industrial clusters are group of firms in a defined geographical area that share
common markets, technologies and skill requirements
2. The important aspects of these clusters is the nature of inter firm network and
interactions
3. The advantages of industrial clusters was first observed by the famous economist
Alfred Marshall in 1920s
4. Try to understand the working of clusters of small firms in the metal working and
textile region in England
5. Hence the notion of industrial district was developed by Marshall
6. Only after the success of small firms in Italy in the 1980s that it became popular,
country like India begin to promote them actively
The chief characteristics of a successful clusters are
a. Geographical proximity of small and medium enterprises
b. Sectoral specialisations
c. Close inter-firm collaboration
d. Inter firm competition based on innovation
e. Socio cultural identity which facilitates trust
f. Multi skilled workforce
g. Active self-help organisations
h. Supportive regional and Municipal governments

1. Firms are expected to collaborate and compete with one another at the same time
2. By collaborating they can expand their capacity and also they can learn from one
another
3. The clusters are more dominant in the Western regions of Tamilnadu
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4. These clusters specialised in activities like clothing, home Furnishing, textiles, leather,
poultry, coir products, transport equipment services, engineering Services and auto
component making
How do clusters originate
1. Most clusters evolved over a long time in history
2. Artisans settle in locality and evolve over centuries
3. When a large firm is established, cluster may to take care of its inputs and service
requirements
4. At times government may decide to encourage manufacturing using raw materials
from region which may also lead to emergence of clusters

Historical development of industrialisation in Tamilnadu

1. We have lot of evidence that in precolonial Tamil Nadu the presence of industrial
activities like textiles, shipbuilding, iron and steel making and pottery were present
2. Due to the vast coastline, the region has been involved in trade both South East
and West Asia for several centuries
3. Colonial policies also contributed to the decline of Handloom weaving industry
4. Some industries had developed during the British period

Industrialisation in the colonial period

1. There are two factors which contributed the process in Tamilnadu
2. The introduction of cotton cultivation in western and Southern Tamilnadu led to the
emergence of large scale of textile sectors which involved ginning, pressing and
weaving operations
3. Introduction of Railways expanded the market for cotton yarn which developed the
sector
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4. The two active ports in the region Chennai and Tuticorin

5. Chennai show the beginning of automobile sector along with leather industry
6. Growth of Jaggery industry in South Tamilnadu
7. Match factories at Sivakasi region which later become the centre for fireworks
production and printing
8. Leather production was taking place in in Dindigul, Vellore and Ambur areas
9. In western Tamil Nadu the emergence of textile industries led to the demand of
textile machinery industry
10. Machinery industry in turn gave rise to many small workshops for repair and
producers of machinery components
11. in 1930's introduction of electricity from hydroelectric power allowed for use of Oil
Engines for drawing groundwater this lead to the expansion of agriculture as well as
increase in demand for Oil Engines
12. Led to emergence of workshops for servicing engines and also for addressing the
demand for spare parts

Post-independence to early 1990's

1. After the Independence many large Enterprises were set up by both the central and
state government such as integral Coach Factory in Chennai, Bharat Heavy Electrical
Limited, Tiruchirappalli, manufacturers of boilers and turbines
2. Heavy vehicles factory in Avadi, Standard Motors started manufacturing cars in
Chennai
3. Ashok Leyland and standard Motors helped to form an automobile clusters in
Chennai
4. The Avadi Industrial Estate was established in 1950's to support the small and
medium companies which supplies to the larger firms in the region
5. The Salem steel plant was set up in 1973 to produce stainless steel
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6. The Coimbatore region witnessed diversification from textiles to textile machinery as

well as Agricultural Machinery like electric motors and pump sets for drawing
groundwater
7. In 1970's and 1980's emergence of power loom weaving clusters in Coimbatore
region and expansion of cotton knitwear, Tirupur.
8. And home furnishing cluster in Karur
9. Hosur industrial cluster is a successful case how the policy is used to promote
industrial estates in the industrial backward region

Industrialisation in Tamilnadu- liberalisation phase

1. The final phase of industrialisation is the post reform period, Since the early 1990s
2. The reforms made by the state government which is responsible for resource
mobilization and they force to complete the private players for investments in
industries
3. Incentives, such as cheap land, tax concessions, subsidised but quality power were
offered to attract investors
4. Trade liberalization and currency devaluation also helped to open export market which
leads to two major developments
5. Because of trade liberalization exports of textiles, home furnishing and Leather
products began to grow rapidly
6. To attract Investments multi-national firms give their entry into the state
7. Mainly automobile industry
8. They brought along other MNC component suppliers and also opened up a new
market opportunities for domestic component producers
9. Chennai region emerged as an electronic industry such as Nokia, Foxconn, Samsung
and Flextronics opened their plants

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10. Tamilnadu has often been hailed a model for successfully using the special economic
zone route to attract productive Investments
11. Other important Industries that evolved in the state were sugar, fertilizer, cement,
paper, agriculture implements, iron and steel, chemical and transformers
12. All these factors made Tamilnadu to have largest number of factories among all
other state in India, and has the largest share of workforce employed in
manufacturing
13. In Tamil Nadu we have 27 clusters in 13 districts many of them being export
oriented as well
14. The state has a well-developed network of roads, rail, air and Major ports
15. The diffusion of industrialisation which gave an opportunity to wide open the social
base for new entrepreneurship
16. In Tamilnad the entrepreneurs come from a dispersed social background with
relatively small size of capital
17. The state has a better mix of large small and household industries this led to the
way for better rural urban linkages in Tamilnadu and in most other states

Major industrial clusters and their specialisation in Tamilnadu

Automotive clusters
1. Chennai is nicknamed as the Detroit of Asia because it has a large base of auto
industry and it is also the home for large number of auto assembly and components
making firms
2. We have domestic firms like TVS, TI cycles, Ashok Leyland, and standard Motors,
several MNC’s like Hyundai, Ford, Daimler- Benz and Renault Nissan have factories in
this region

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3. Hosur is another auto cluster with firms like TVS, and Ashok Leyland and in
Coimbatore region it is also having an auto component cluster

Truck and bus body building industry cluster

1. Namakkal, Tiruchengode, in western Tamil Nadu is known for truck body building
industry
2. Karur is an another major hub for truck body building industry

Textile clusters
1. Because of the development of cotton textile industries since colonial period,
tamilnadu is the home to the largest textile sector in the country
2. Coimbatore is referred as the Manchester of South India
3. At present most of the Spinning Mill were moved to smaller towns and villages
around the Coimbatore city
4. Tamilnadu is the biggest producer of cotton yarn in the country
5. Palladam and Somanur are home to dynamic power loom weaving clusters
6. Power loom is more widespread in Erode and Salem region
7. Tirupur is famous for producing cotton knitwear, it accounts 80 percentage of the
country's cotton knitwear export and generates employment over 3 lakh people since
1980s
8. Karur is a major Centre for exports of home Furnishings like table cloth, curtains,
bed covers, and towels
9. Bhavani and kumarapalayam are the major centres of production of carpets, both for
the domestic and the Global markets
10. Madurai and Kanchipuram are famous for silk and cotton Handloom sarees

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Leather and Leather goods clusters

1. Tamil Nadu accounts for 60 percentage of leather tanning capacity in India and 38
percentage of all Leather footwear garments and components
2. Leather and tannery facilities are located around Vellore and nearby towns such as
Ranipet, Ambur and Vaniyambadi
3. The Vellore district is the top exporter of finished leather goods in the country
4. Chennai is also having a large number of leather product making units involved in
Exports
5. Dindigul and Erode is also an another clustering for leather processing

Fireworks, matches and printing cluster

1. Sivakasi region once famous for its match industry but now it has become a major
Centre for printing and fireworks in the country
2. It is believed that it contributes 90 percentage of India's firework production, 80
percentage of safety matches under 60 percentage of offset printing solutions

Electronics and information technology clusters

1. After the economic reforms in early 1990s, state has seen the entry of hardware
and electronics manufacturers like Nokia, foxconn, motorola, sony Ericsson, Samsung
and Dell making cellular handset devices, circuit boards and consumer electronics
2. Chennai still continues to be a minor electronic hub in the country
3. Expansion of software sector in Chennai and to certain extent in Coimbatore

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Policy factors that helped the industrialisation process in Tamilnadu

The policy factors that can be divided into three aspects
Education/ infrastructure/ industrial promotion
Education
1. Industries requires skilled human resources
2. Apart from primary education to promote literacy and basic arithmetic skills state is
known for its vast supply of Technical human resources

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3. Tamil Nadu who is having one of the largest number of engineering colleges,
polytechnics, and industrial training centres in the country

Infrastructure
1. Diffusion of electrification has contributed to the spread of industrialisation to smaller
towns and villages in the state
2. Along with electrification Tamilnadu is known for its excellent transport infrastructure
which connects rural part of the state to nearby towns and cities
3. Combination of public and private transport has facilitated the connectivity from rural
to Urban and therefore it connects small producers to better markets

Industrial promotion
1. Government policy was made to promote specific sectors and industrialisation in
specific regions
2. To promote sectors like automobile, auto components, biotechnology and Information
and Communication Technology
3. State has several industrial promotion agencies for both large Enterprises and small
and medium segments to provide and support infrastructure facilities

The agencies played key role in industrialisation the state

SIPCOT (State Industries promotion corporation of Tamilnadu), 1971
1. It was formed in the year 1971 to promote industrial growth in the state and to set
up industrial estates

TANSIDCO (tamilnadu small industries Development Corporation), 1970

1. It is a state agency established in the year 1970 to promote small scale industries in
the state
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2. It gives subsidies and provide technical assistance for new firms in the small scale
sector

TIDCO (Tamilnadu Industrial Development Corporation), 1965

1. It is also an another government agency to promote industries in the state and to
establish industrial estates

TIIC (Tamilnadu Industrial Investment Corporation Limited), 1949

1. It is intended to provide low-cost financial support for both setting up new units
and also for expansion of existing units
2. 90% of the support goes to micro small and medium enterprises

TANSI (small industries corporation limited), 1965

1. To take over the small scale units that was set up and run by the department of
industries and Commerce
2. It is supposed to be the first industrial Corporation operating in the domain of small
Enterprises

Emergence of service sector in Tamilnadu

1. With technological change, industries are not able to absorb labour.
2. Automation has been reducing the need for labour in manufacturing units
3. Service sector has emerged as a bigger employer over the last three decades
4. Tamilnadu has become most important and dynamic hub for service sectors such a
software services, healthcare and educational services
5. These sectors are largely confined to Chennai, in the last 10 years few software
firms have shifted their office to Coimbatore

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Entrepreneur
1. Entrepreneur is an innovator of new ideas and business processes
2. His process management skills, strong team building abilities and essential leadership
qualities to manage a business

Entrepreneurship
1. It is a process of action by an entrepreneur who undertake to establish his
Enterprises
2. It is the ability to create and build something

Role of an entrepreneur
1. They promote development of industries and help to remove regional disparities
by industrializing rural and backward areas
2. They help the country to increase the GDP and per capita income
3. They contribute towards development of society by reducing concentration of
income and wealth
4. They promote capital formation by mobilizing the idle savings of the citizens and
country’s export trade
5. Entrepreneurs provide large scale employment to artisans, technically qualified
persons and professionals and work in an environment of changing Technology
and try to maximum profit by innovation
6. They enable the poor to avail better quality goods at lower price which results in
the improvement of their standard of living

GOOD LUCK
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