Biz in 2014:Nokia exit brings Tamil Nadu back to drawing board

Chennai: It may have taken years for Tamil Nadu to emerge as a major industrial hub, but it’s just one deadly blow served by global giant Nokia’s exit that has sent it back to the drawing board to regain its lost glory.

Having suffered a huge ‘Nokia’ setback in 2014 in terms of thousands of job losses and a significant revenue loss, the country’s third largest state in terms of industrial output now faces an uphill task ahead in 2015 amid a politically charged-up environment due to conviction of powerful former Chief Minister J Jayalalithaa.

The state will be banking on its focus industries including automobiles, textiles, heavy industries and technology during 2015, while it aims to attract a new set of foreign companies to set shop and has lined up an ambitious global investors summit in the new year.

As it tries to come to terms with the blow inflicted upon it by Nokia’s exit, Tamil Nadu is hoping that new investors would come as the exit of the handset major was not because of any adversities within the state and the fact that at least 35 Fortune 500 companies are still present here.

The state received over USD 12.5 billion worth of FDI between 2000 and 2014 and is the only one to attract seven automobile giants – Ford, Hyundai, Mitsubishi, Daimler, Nissan, Renault and BMW — along with major global players in other sectors, a senior state government official said.

Besides, the state already boasts of software exports totalling USD 11 billion.

As per its Vision Tamil Nadu 2023 programme, the state has targeted to attract USD 250 billion for infrastructural development, while its industrial output has grown two-fold during 2005-2010 with an annual growth rate of 18.6 per cent.

Industry leaders and the government officials, however, agree that the exit of Nokia, which employed a peak headcount of 9,000 people directly for its mega plant at Sriperumbudur about 30 kms away from the state capital, was a big jolt. The total employment after taking into account its ancillaries and suppliers stood at 35,000-40,000.

The plant’s future turned uncertain soon after it had to be kept out of the USD 7.2 billion global acquisition of Nokia by software giant Microsoft due to a major tax dispute.

Even as the Tamil Nadu Commercial Tax department slapped a tax demand of Rs 2,400 crore on the MNC, the company got entangled into a much bigger tax dispute of Rs 21,000 crore with the Centre.

After months of deadlock, the company finally decided to stop production at this plant, which had become one of biggest mobile phone plants globally. It was manufacturing 11 per cent of total handset requirement of the world, producing four handsets every second.