A southern alliance and an elephant in the room

Naidu’s proposed alliance would do well to address broken state finances that can derail the region’s long-term growth prospects

The South’s problems partly resemble those of Europe from rapid population ageing and ballooning public debts.

3 min readOct 26, 2026 06:00 AM IST First published on: Oct 26, 2026 at 06:00 AM IST

Andhra Pradesh Chief Minister N Chandrababu Naidu apparently seeks to forge an informal “southern alliance” — to arguably work with his counterparts in Tamil Nadu, Telangana, Karnataka and Kerala towards building a $10 trillion-plus bloc by 2047. The five states together account for less than a fifth of India’s population but over 31 per cent of its GDP, 35 per cent of factories and foreign direct investment equity inflows, and 26 per cent of total GST revenue collections. Bengaluru, Hyderabad and Chennai house the country’s busiest airports after Delhi and Mumbai, with Kochi at No 8, just below Kolkata and Ahmedabad. Even more striking are the 2,100-odd global capability centres of the world’s top multinational firms, employing nearly 24 million professionals — more than 80 per cent of these are in Bengaluru, Hyderabad and Chennai.

The economic heft, however, hides structural weaknesses. The first is ageing populations. The current median age in the five southern states, at 33-36 years, is more than the 30 years for all-India and 23-26 for Bihar and Uttar Pradesh. Roughly 19 per cent of Kerala’s population and 16 per cent of Tamil Nadu’s are aged above 60 years, as against the national average of 11.4 per cent and 8.5-9 per cent for Bihar and UP. It translates into heavy reliance on migrant labour from the North and East — be it for factories, construction sites, office complexes, hotels or poultry farms. That isn’t a bad thing, from a national integration standpoint. More concerning, however, is the fiscal position. TN’s outstanding liabilities of Rs 10.4 lakh crore (2025-26 budget estimate) exceed that of any state government. AP’s and Kerala’s debt-GDP ratios of 35.4-35.5 per cent are higher than the 29.2 per cent average for all states. The southern states also have a 45 per cent share in the accumulated losses of all state-owned electricity utilities.

The South’s problems partly resemble those of Europe from rapid population ageing and ballooning public debts. While some of that is due to sustained investments in public healthcare and education — which have helped lower fertility rates and raise life expectancies — there has also been a profusion of cash transfers, highly subsidised power and public transport, and other such schemes with low positive externalities. Unlike Europe, the South thankfully isn’t facing economic stagnation. Naidu’s proposed alliance would do well to address the elephant in the room: Broken state finances that can derail the region’s long-term growth prospects. It would add to the credibility of collective bargaining with the Centre, whether on fiscal devolution or delimitation.