At the NITI Aayog meeting on June 11, 2026, Tamil Nadu Chief Minister C. Joseph Vijay announced the goal of transforming Tamil Nadu into a $1.5 trillion economy by 2035-36. A similar view has also been expressed by others.

Required growth rate

Tamil Nadu’s Gross State Domestic Product (GSDP) was ₹35.29 lakh crore in 2025-26. To achieve the target of $1.5 trillion in 10 years, Tamil Nadu would have to increase the size of its economy to ₹172.56 lakh crore by 2035-36, registering a 4.9-fold increase. This calculation is based on the assumption that the exchange rate of one dollar in terms of rupees will appreciate by 2% per annum from its present level, touching ₹115.38 per dollar in 2035-36. This implies that achieving the target would require a nominal growth rate of 17.2% and, assuming inflation of 5%, a real growth rate of 12.2% per annum continuously for 10 years.

If the Tamil Nadu economy grows at a nominal rate of 17.2%, the State’s per capita income will increase from $4,808 in 2025-26 to $19,157 in 2035-36, which would be slightly higher than the $16,383 estimated by the writers as per capita income norm for a developed country. This estimation is made based on the past trends in the cut off set by the World Bank. In this scenario, Tamil Nadu, with a per capita income of $16,672, would achieve Viksit Bharat status by 2034-35, well before India’s aspiration to become a developed country by 2047. However, this may not be within the realm of possibility. In the past, Tamil Nadu’s real growth exceeded 12% only in three years: 13.96% in 2005-06, 15.21% in 2006-07 and 13.12% in 2010-11. It must also be noted that the growth rate required to achieve the target would rise if the rupee depreciates more than what is implied in the above calculations. Also if the cut off per capita norm for developed country is higher than what we have estimated, it will again take a longer time to reach the target.

Possible scenarios

The table below presents the results for a scenario with a 15% nominal growth rate, which may be considered achievable given the required effort. Under this scenario, the target would be achieved in 2037-38. Assuming 5% inflation, the real growth rate required would be 10%.

Under this possible scenario, the State’s per capita income in 2035-36 will be $15,850, which will be slightly lower than the $16,383 cut-off for a developed country. However, under this scenario, Tamil Nadu will achieve developed-country status in 2036-37, as its per capita income of $17,850 will be higher than the $16,565 cut-off for that year.

The feasibility of achieving this real growth rate depends on the past performance of the Tamil Nadu economy. From 2005-06 to 2011-12, Tamil Nadu registered strong real growth, at 2004-05 prices, of 10.3% per annum, compared with an all-India growth rate of 8.2%. However, its average annual growth rate, at 2011-12 prices, declined to 6.98%, compared with an all-India growth of 6.96%, from 2012-13 to 2018-19. Interestingly, its growth performance improved to 9.1% from 2021-22 to 2025-26, compared with an all-India growth rate of 8.1%.

With an average real growth rate of 9.1% (and a nominal growth rate of 14.1%), Tamil Nadu’s target will be achieved in 2038-39. Under this scenario, the developed-country per capita income norm will be attained in 2037-38. This should also be considered a possible scenario.

One trillion dollar economy

The earlier aspiration for Tamil Nadu was to reach a one-trillion-dollar economy by 2030. Under the 12.2% real growth scenario, the $1 trillion economy target would be achieved in 2033-34. The target would be reached in 2034-35 under both the 10% and 9.1% growth scenarios.

To sustain a real growth rate of 10%, the investment rate required would be 40% of GSDP, assuming an Incremental Capital Output Ratio (ICOR) of 4. Achieving an ICOR of 4 itself would require improved efficiency in the use of capital. This investment would have to be financed by domestic savings, supplemented by a flow of resources from the rest of India and other countries. Tamil Nadu must be made an attractive investment destination by creating an appropriate investment environment.

Moreover, a stable economic environment, ensuring both price and fiscal stability, will support strong growth over a sustained period. With nominal growth of 14%, the State should work towards a fiscal deficit of less than 3% so that the debt-GSDP ratio stabilises at around 23%, a sustainable level in the medium term.

What has been presented so far can be described as the arithmetic of achieving a $1.5 trillion economy by Tamil Nadu. What can happen a decade from now will depend on a number of factors.

Therefore, any projection over such a long period has to be conditional. Perhaps, the most likely scenario is a nominal growth rate of 14% per annum over the next 10 years, which will take Tamil Nadu towards becoming a $1.5 trillion economy by 2038-39. We can always strive for something better.

C. Rangarajan is former Chairman, Economic Advisory Council to the Prime Minister, former Governor, Reserve Bank of India, and Chairman, Madras School of Economics. K.R. Shanmugam is former Director, Madras School of Economics