Maharashtra, Tamil Nadu and Gujarat are the leading industrial states of India. Each of these is characteristically different. While Tamil Nadu is a labour-intensive industrial state, Gujarat industries are capital-intensive. And, Maharashtra is the state that deploys both, labour and capital, better than both the other two states. Gujarat is among the worst users of capital.
According to the Annual Survey of Industries (ASI), Tamil Nadu employed 1.9 million in the organised factory sector in the state in 2010-11. This was the highest amongst all states. Maharashtra followed with an employment of 1.7 million in factories and Gujarat and Andhra Pradesh were a distant third with 1.3 million, each.
Tamil Nadu's lead in terms of employment can be appreciated better when we see factory employment as a per cent of the size of the state. Factory employees account for 2.7% of the population of the state, implying that roughly 12% of the households could have a factory-employed person in the state. This is much higher than other states. Factory employment, of course, being a part of organised employment, is a preferred employment. And, Tamil Nadu clearly leads in this respect.
But, Tamil Nadu factories are not the best of paymasters. Total emoluments per employee at R1.15 lakh in the southern state was lower than Gujarat’s R1.43 lakh and, it was much lower than Maharashtra’s R1.98 lakh. The disparity is much bigger in terms of wages per worker (workers constitute about 75% of total employees). Wages per worker in Maharashtra were nearly twice as high as in Tamil Nadu and Gujarat was closer to Tamil Nadu than Maharashtra.
Tamil Nadu's relatively large factory employment at relatively low wages has spread employment, but these low wages have not helped the factories in Tamil Nadu to be more productive. Net income per employee in the state at R3.1 lakh was nearly half of Gujarat's R5.99 lakh and way below Maharashtra's R7.8 lakh. Profit per employee in the factories of Maharashtra at R5.42 lakh is 2.5 times higher than the R1.65 lakh profit per employee in Tamil Nadu and 27% higher than in Gujarat.
Part of the reason for this low productivity of Tamil labour is the low investment of capital. Productivity of labour can be increased by the appropriate infusion of capital. Tamil Nadu factories invest R8 lakh into fixed capital per employee, which is much lower than Maharashtra’s R14 lakh and even lower than Gujarat’s R21 lakh