Tools for growth: TN’s export architecture needs precision

On August 5, Tamil Nadu Finance Minister N Marie Wilson presented the maiden budget of the new government, confirming a forthcoming Industrial Policy for export promotion, innovation, technology, and logistics. The timing is crucial. Nearly five years ago, the TN Export Promotion Strategy 2021 set the target of $100 billion in exports by 2030, up from $26 billion at the time, as part of a $1 trillion economy goal. The State has since reached $59.31 billion (2025-26). While the pace of export growth is remarkable, closing the gap between realised and target exports is an uphill task, as the trade environment the strategy considered in 2021 has shifted considerably and is incessantly evolving.

The Federation of Indian Export Organisations' (FIEO) State-wise Export Report for 2025-26 suggests that Tamil Nadu's exports grew by 14 per cent in 2025-26 from 2024-25, led by telecom instruments, textiles, automobiles, and electronics. Its breadth of export capabilities is truly commendable – TN dealt with 162 of the 169 principal commodities traded nationally.

In merchandise exports, TN ranks third among Indian states, contributing 13.43 per cent of India's total exports in 2025-26, behind Gujarat (25 per cent of India’s total exports) and Maharashtra (16 per cent). Furthermore, the average growth of TN’s trade share suggests that the State is catching up to the two states ahead of it in export performance. TN's share rose from 8.3 per cent in 2021-22 to 13.43 per cent in 2025-26, at a higher blip than Gujarat and Maharashtra.

In addition, TN emerges as a bright spot in relative ranking of Export Preparedness Index (EPI), indicating trade preparedness of states. NITI Aayog's 2024 EPI, based on four pillars such as export infrastructure, business ecosystem, policy & governance, and export performance, places TN second nationally, trailing only Maharashtra.

It is evident that TN has a strong export base, backed by a maturing trade ecosystem such as industrial corridors, port and logistics infrastructure, smooth connectivity, and steady gains in ease of doing business. Backing the export ecosystem, the State has strong institutional scaffolding as well – the TN Export Promotion Strategy (EPS) 2021 that envisions enhancing export potential while identifying champion sectors; and the State and District Export Promotion Committees. Nonetheless, narrowing the State's declared target of $100 billion by 2030 will require an understanding of untapped areas of the State’s potential. A closer look at TN's export performance points to areas where the policy thrust, going forward, should lie.

As per FIEO report, only 10 of the State's 38 districts accounted for 93 per cent of exports in 2025-26. This reflects high regional concentration of export capacity with 74 per cent of region left on the periphery of the State’s export success. While TN boasts of diversified exports, several traditional export sectors such gold jewellery and handloom have languished owing to global price fluctuations, knotty customs compliance, and competition. EPS 2021 rightly discussed developing districts as export hubs. As a first step, it is pertinent to map product lines to comparative advantages of under-represented districts.

Second, TN must price in the exposure to uncertainty its champion sectors have in the international market. For instance, its champion sectors such as auto components and electronics are the most affected by the US tariff policy. Similarly, textiles and leather goods face the impending EU's Carbon Border Adjustment Mechanism (CBAM), which will begin pricing embedded carbon into exports of precisely the intermediate goods TN manufactures at scale. Hence, it is critical to do a regular rigorous sector wise sensitivity assessment to enhance export preparedness. While the India-EU FTA – touted as the “Mother of all deals” – has provisions for SMEs to get assistance on CBAM and many other market access features, TN government has to come up with a strategy to take advantage of these and other FTAs to promote exports.

Third, the US being the top export destination for TN makes it further vulnerable to volatile US trade policies. India’s recent trade agreements with different countries and groupings present opportunities for TN to diversify its export destination beyond the United States. However, accessing new markets opened by these trade agreements requires adhering to new compliance standards, tracking non-tariff barriers, and strengthening the competitive edge in technology and high-value exports.
This brings us to the fourth imperative, i.e., deepening global value chain (GVC) participation. This will require TN’s champion sectors such as automobiles, electronics and electrical equipment, and machinery to swiftly move beyond assembly of components to engineering hi-tech components, product design and R&D. To this effect, TN must utilise trade agreements with capital- and tech-rich partners to attract technology-oriented investments that deepen its integration in GVCs. In other words, trade agreements should be leveraged as instruments of industrial growth, not solely to secure alternative market access.

Finally, there is the demographic constraint that needs attention. Population projections based on the 2011 Census point to TN’s working-age population peaking in 2026 — this very year — after which it is projected to decline. The implications for exports are not immediate, but they compound over the medium to long run. A shrinking size of labour pool narrows the range of industrial upgrading the State can pursue, slows the pace of technological absorption on factory floors, and, when left unaddressed, diminishes export competitiveness by chipping at the efficiency, swiftness, and scale of production. Therefore, TN needs policy investment in labour mobility and retention as an important measure to buoy export-readiness. This could include wage stability, formal contracts, health insurance, and conducive work environment across factory floors for a sustained productive workforce, even as the absolute size of TN’s population falls.

TN has built a strong export structure. The next few years will require it to navigate a volatile global trade environment and changing trade rules, align with evolving structure of export demand taking advantage of new age FTAs, move up the value chain, and further strengthen its own export capacity at every district and sector.