TN Polls 2026: The Political Economy Context

The forthcoming Tamil Nadu Assembly elections, scheduled for April 23, 2026, are effectively shaping up to be a referendum on two competing futures: will Tamil Nadu maintain a trajectory of development that is significantly autonomous of the neo-fascist dispensation in India, or will Tamil Nadu be politically re-engineered by the neo-fascist dispensation, like many other states?

The Neo-Fascist Offensive Against State Govts

The relations between the state and Union governments have undergone both a qualitative and quantitative change under the neo-fascist dispensation in India. On the one hand, Opposition-ruled states, such as Tamil Nadu, have been systematically starved of a fair share of the financial resources that emerge from the tax revenues of these states themselves.

This fiscal squeeze has been compounded by limits on borrowing by state governments, accounting redefinition of tax revenues as cesses to prevent their being shared with states, reducing the quantum of union government support for jointly funded schemes (such as the rural employment guarantee), inordinately delaying the transfer of the share of tax revenues collected to state governments, illegally levying anti-federal conditions to give effect to the transfer of tax revenues collected to state governments, etc.

The qualitative dimension of the anti-federal offensive is the utilisation of the office of the Governor and other agencies of the Union government by the neo-fascist dispensation to try to disrupt the functioning of such state governments.

It is an incontrovertible reality that Tamil Nadu contributes a substantially larger share of its tax base to the Union exchequer than it receives back in devolution. Despite being a powerhouse of taxation from a range of sectors, the state receives only a smallish fraction of the total taxes collected from its territory. This is not an accident of arithmetic but a deliberate strategy of discrimination by the neo-fascist dispensation.

By denying Tamil Nadu its due share under the anti-federal criteria framed by Finance Commissions (that are unilaterally constituted by the Union government), the neo-fascist dispensation seeks to starve the state of even the relatively limited fiscal autonomy that is guaranteed by the Constitution. This has had an adverse impact on the ability of the state government to adequately enhance both its revenue and capital expenditures compelling it to take recourse to seek net returns from liquor sales through outlets of the Tamil Nadu State Marketing Corporation or TASMAC, increases in utility charges often under (constitutionally questionable) duress from the Union government etc.

Industrialisation in TN and China+1 Process

Paradoxically, while the Union government denies Tamil Nadu its fair share of financial resources, the state is possibly the undisputed largest beneficiary of the China plus one process within India. Inward greenfield foreign direct investment (FDI) from the rest of the world has found its most fertile ground here.

If the Union government were to accord Chinese greenfield FDI the same legal status as greenfield FDI from the rest of the world, the consequent industrialisation of Tamil Nadu would accelerate even further for two interrelated reasons. One, the total quantum of inward greenfield FDI in Tamil Nadu would rise. Two, the terms that the state government would obtain from foreign firms who are undertaking greenfield FDI would be superior to what prevails today due to competition between Chinese and non-Chinese firms.

Why is Tamil Nadu able to capture a disproportionate share of inward greenfield FDI? Proximity to the sea (Bay of Bengal) is necessary but not sufficient as an explanation. For instance, Andhra Pradesh, Karnataka and Odisha, too, are coastal states but their shares of inward greenfield FDI are not as significant as Tamil Nadu.

The decisive factors in explaining this trend are firstly relative economies of scope and scale in Tamil Nadu as compared to other states. Economies of scope (the ability to jointly produce various commodities using relatively more felicitously shareable inputs) are deep in certain parts of the state, such as the Chennai-Kanchipuram-Sriperumbudur industrial belt. The relatively greater incidence of economies of scope and scale is the consequence of industrial policy interventions by successive state governments including the setting up of industrial parks (where a given magnitude of infrastructural attainment can be effectively shared by multiple firms).

Besides, unlike other states, such as Gujarat, where the relative incidence of manufacturing, too, tends to exceed other states, Tamil Nadu has a relatively more educated and healthier population that is possibly second only to Kerala. This relatively higher attainment in health and education in the state is conducive to labour arbitrage along the lower-middle and middle reaches of the technological ladder that pertains to global production networks.

However, the industrialisation of Tamil Nadu driven (significantly but not exclusively) by the China plus one process has had implications for democratic rights. To maintain the cost competitiveness required to contend with alternative locations of the China plus one process, the state government for many decades has engaged in an on-off attempt to restrict democratic rights of workers and peasants. The quest underlying these measures is to try to prevent the share of wages in value added from rising. This is sought to be achieved through a combination of measures: the effective criminalisation of legitimate strikes via preventive detention, the dilution of minimum wage enforcement and trade union rights, relative openness to labour migration from other states of India, and persistent attempts to suppress peasant protests against corporate land acquisition as part of the process of primitive accumulation of capital.

However, such an attack is not confined to Tamil Nadu. Across India, the Bharatiya Janata Party-led Union government has launched, at the behest of US-centred international finance capital, an offensive against democratic rights that vastly exceeds qualitatively and quantitatively what is the case in Tamil Nadu. The aforementioned divergence between Tamil Nadu and other states that are under the rule of the neo-fascist dispensation is on account of two factors.

First, the Left parties are part of a political-electoral alliance with the ruling Dravida Munnetra Kazhagam (DMK); they have led and supported various protracted struggles to try to resist attacks on democratic rights with a fair degree of success, including the attainment of a defined benefit pension scheme that closely approximates the old pension scheme, and the legal recognition of the trade union of Samsung workers, etc.

Second, excessively squeezing the share of wages in Tamil Nadu will attenuate (through demand redirection on account of adverse income distribution) the ability of regional capital to profitably engage with the process of accumulation in the state.

The dialectic between the China plus one process and Tamil Nadu's relative advantages has yielded an output boom. Factories tend to run multiple shifts, and the Gross State Domestic Product growth consistently and significantly outpaces the national average, especially since 2021. Yet, the character of employment generated through this process of growth is both relatively limited and disproportionately precarious. Contract labour, gig work, and other types of precarious employment now constitute the majority of new jobs in the state.

However, the level of the average post-tax wage rate, when augmented by state government-funded direct benefit transfer payments (to women, university students, etc.) and other measures such as public provision of breakfast to students in state government schools and fare-less local bus travel for women, has resulted in a level of mass consumption (backed by a social wage) that is second only possibly to Kerala. This is also associated with levels of female labour force participation in paid work (including in the organised sector) that is unrivalled elsewhere in India.

However, in the absence of public support for social reproduction to the required extent, this elevated level of female labour force participation in paid work in the state is likely also to lead to a step up in depletion, or some disruption in social reproduction, or some combination of both processes.

Some Peculiarities in the Accumulation of Capital

Unlike most other states, where a handful of monopoly capital conglomerates dominate, the accumulation of capital in Tamil Nadu has been relatively less centralised and concentrated. The state has a greater role for non-monopoly capital, including in the segments of global production networks in the state involving global component suppliers and locally owned ancillary units.

This relatively less centralised and concentrated structure of capital is also relatively less based around primitive accumulation of capital and more around enterprise accumulation through incremental technological upgrading, since relative rates of return have been so structured through a complex process of interplay between the actions of the state government of Tamil Nadu, the union government, international capital, domestic monopoly capital, regional capital and the struggles of working people.

Domestic monopoly capital and its champion, namely, the neo-fascist dispensation, are keenly pursuing the objective of remaking Tamil Nadu to be more akin to most other parts of India by comprehensively re-centring domestic monopoly capital in the process of accumulation of capital in the state.

The neo-fascist dispensation has undertaken a threefold manoeuvre to try to achieve its objective. First, the aforementioned attempt at a fiscal strangulation of the state government is ongoing.

Second, the neo-fascist dispensation has been tirelessly seeking to further the Hindutva agenda in the state by seeking to undermine in various ways the unique political-historical trajectory of the state, including vainly seeking to impose Hindi in the state via the National Education Policy 2020, persistently seeking to ratchet up communal conflict in the state around the spaces of syncretic religious observance.

These forces are also cynically stoking pre-existing caste cleavages in the state thereby seeking to decelerate the struggles to limit and reverse empowerment gaps between intermediate castes on the one hand and Dalits and tribals on the other, pursuing a process of trying to undermine the Keezhadi and related archaeological excavation's challenge to the Hindutva myth of a unitary origin of Indian civilisation.

Also, they are stubbornly imposing the National Eligibility-cum-Entrance Test (NEET) even for state government-funded medical colleges and institutions, thereby disadvantaging aspirants from semi-urban and rural areas in the state which inter alia is undermining the reach and quality of healthcare in these areas, etc. If this undermining process crosses a threshold level, then consent will have been manufactured for re-centring domestic monopoly capital in the process of accumulation of capital in the state.

Third, the neo-fascist dispensation has sought to use the All India Anna Dravida Munnetra Kazhagam (AIADMK) party, which it has effectively neutered through political re-engineering, barring some appearances which are considered necessary to avoid a complete loss of political credibility, as a Trojan horse. If this machination succeeds, then a pliable AIADMK government (that is de facto and eventually de jure controlled by the neo-fascist dispensation) would be deployed to comprehensively re-centre domestic monopoly capital in the process of accumulation of capital in the state.

The related process of politically re-engineering the Tamizhaga Vetri Kazhagam (TVK) by the neo-fascist dispensation is still work in progress. However, the anti-intellectualism of the AIADMK and TVK and their organisational disarray (both spontaneous and induced by the neo-fascist dispensation) increases the likelihood of political re-engineering, with residual uncertainty remaining only as regards the time horizon involved.

The Emergent Broad Front

In order to confront this complex challenge mounted by the neo-fascist dispensation, the Dravidian movement, the Left movement and the Ambedkar movement are seeking to consolidate a broad front for the April 2026 Assembly elections. These elections will, therefore, revolve around political economy. Though this underlying political economy will be articulated by different participants in the broad front in diverse ways, their basic unity of purpose cannot be doubted.

The continuance of Tamil Nadu as a bulwark against Hindutva (which inter alia will resist the neo-fascist dispensation's quest to comprehensively re-centre domestic monopoly capital in the process of accumulation of capital in the state) is essential. The Left, while wholeheartedly participating in the broad front, must articulate the varied contours of an alternative political economy that is centred on secularism, federalism, social justice, gender justice and economic democracy.

The writer is Professor, Department of Economics, Satyawati College, University of Delhi. The views are personal.