Non-BJP, non-poll-going Tamil Nadu bags meaty projects in Budget 2025

One of the surprise big beneficiaries of the Union Budget 2025 was Tamil Nadu. Despite the BJP’s humiliating losses in the state in the Lok Sabha elections last year, and the assembly elections more than a year away, the DMK-ruled state bagged a few favourable projects.

Unlike the previous Budgets, this one included several key references to Tamil Nadu, starting with the Tirukkural, an ancient text of wisdom on the ethics and morality of commoners). But it did not end with rhetoric.

With a marked focus on infrastructure projects, industrial development, urban sustainability, and employment generation, Union Finance Minister Nirmala Sitharaman, in her Budget speech on Saturday (February 1), announced a couple of major projects for the state, including initiatives in the Global Capability Centres (GCC) sector and the non-leather footwear industry.

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Tamil Nadu’s footwear push

In recent years, Tamil Nadu has actively attracted major footwear manufacturers, developed rural industrial clusters, and created employment opportunities, particularly for women. In 2022, the state government introduced a dedicated policy for footwear and leather products to support both large-scale manufacturers and small enterprises, fostering a comprehensive ecosystem for growth.

These initiatives have drawn significant foreign investments into Tamil Nadu, too. One of the key highlights is the collaboration between Nike and the Taiwan-based Feng Tay Group for leather goods’ production in Tamil Nadu. The state government has identified locations in Madurai and Sivagangai districts for setting up footwear manufacturing units.

Top investment destination

Additionally, Tamil Nadu’s investment promotion agency, Guidance Tamil Nadu, is working closely with Taiwanese investors to enhance partnerships in the footwear sector. The agency has also established ties with Nike’s key contract manufacturers, including Pou Chen, Hong Fu, Taekwang, and Chang Shin.

The Economic Survey, too, recognized Tamil Nadu as a top investment destination, citing its investor-friendly policies, which include capital subsidies, wage incentives, and land price subsidies.

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“'To enhance the productivity, quality and competitiveness of India’s footwear and leather sectors, a focused product scheme will be implemented that will facilitate employment for 2.2 million people, generate turnover of Rs 4 trillion, with exports over Rs 1.1 trillion in the leather and footwear sector,” the minister said in the Budget speech.

Moreover, she proposed to fully exempt Basic Customs Duty (BCD) on wet blue leather. Within minutes of her speech, shares of footwear companies rose in trade.

DMK president MK Stalin said the Economic Survey had acknowledged the exclusive policy by the Tamil Nadu government as a crucial step towards expanding the sector and enhancing employment generation.

“Tamil Nadu has long been a leader in traditional leather product manufacturing. Now, the state has also achieved significant progress in non-leather footwear production. Tamil Nadu contributes 38 per cent of India’s leather and footwear production and 47 per cent of the country’s total leather goods exports. Additionally, over 2 lakh jobs have been created in the leather industry,” Stalin said in a statement.

TN infrastructure on growth ladder

Next to industrial growth, announcements related to infrastructure and investments in the technology sector also attracted attention.

Tamil Nadu’s hopes for funding for the second phase of the Metro Rail project were addressed in the Budget as well. According to Budget notes, Chennai Metro Rail (Phase 2) - Corridor 4 will receive funding from the Asian Infrastructure Investment Bank (AIIB) through a USD 356.67 million (Rs 3,092.35 crore) loan.

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Another key infrastructure project, the Chennai Peripheral Ring Road (Phase 1), will be funded by the Japan International Cooperation Agency (JICA) through a loan of JPY 37,270 million (Rs.20,835.93 crore).

Boost to climate and disaster resilience

Tamil Nadu MPs have consistently raised concerns about disaster relief in Parliament. This Budget has allocated Rs 658.66 crore for the Integrated Urban Flood Management for Chennai-Kosasthalaiyar Basin Project, which will be funded by the Asian Development Bank (ADB). The project aims to strengthen climate and disaster resilience in the Chennai-Kosasthalaiyar River basin, reducing the exposure of 1.9 million people to seasonal flooding.

Additionally, the Sustainable Urban Infrastructure Development — Chennai Storm Water Management Project — will receive Rs 186.44 crore in funding from the German Development Bank (KfW).

Big push for GCCs sector in TN

Among Finance Minister Sitharaman’s major announcements was the development of a national framework to guide states in promoting Global Capability Centres (GCCs) in emerging Tier II cities. India is home to over 1,700 GCCs, accounting for 17 per cent of such centres globally.

Chennai has seen over 25 per cent growth in GCC headcount in 2023-24, surpassing other Indian cities. Additionally, cities such as Salem, Vellore, Madurai, Tiruchi, and Tirunelveli are emerging as GCC hubs. Tamil Nadu already has over 350 GCCs in Chennai and more than 25 in Coimbatore. Experts believe this trend will continue in 2025.

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Speaking to The Federal, R Mahalingam, Managing Director of Netcon Technologies, said the new scheme for GCCs in Tier II cities would further boost foreign investments in Tamil Nadu.

“Many international agencies are keen on setting up GCCs here. Tamil Nadu is already a leader and will continue to attract investments in Tier II cities with support from the Union government,” he said.

Rise of women’s workforce

Regarding initiatives for startups and women entrepreneurs, R. Nandhini, Chairperson of CII Southern Region, stated that Tamil Nadu would benefit significantly from the schemes announced in the Budget.

“Tamil Nadu has recorded the largest number of women-led startups and the highest percentage of female workforce participation. This is a positive Budget for women entrepreneurs. Many women struggle to secure loans, and the Budget allocation specifically for SC/ST women entrepreneurs is an excellent initiative. Tamil Nadu will greatly benefit from these schemes,” she told The Federal.

Kanimozhi’s denial

DMK MP Kanimozhi, however, criticized the Budget, stating that it seemed more like a state budget for Bihar. “In all my years in Parliament, this is the first time I have had the opportunity to listen to Bihar’s State Budget in Parliament,” she tweeted sarcastically.

When The Federal asked her about the benefits for Tamil Nadu, including GCCs and the non-leather footwear industry, she responded, “There are no specific announcements for Tamil Nadu. While GCCs and the non-leather footwear industry were mentioned, that does not guarantee direct benefits for the state. Except for Bihar, no non-BJP-ruled state has received any significant allocation in this Budget.”

Bihar is ruled by the BJP’s NDA partner JD(U), though.