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Economy of Kerala

Agriculture dominates the Keralite economy. Kerala lags behind many other Indian states and territories in terms of per capita GDP (11,819 INR) and economic productivity. However, Kerala's Human Development Index and standard of living statistics are the best in India. Indeed, in select development indices, Kerala rivals many developed countries. This seeming paradox — low GDP and productivity figures juxtaposed with relatively high development figures — is often dubbed the "Kerala Phenomenon" or the "Kerala Model" of development by economists, political scientists, and sociologists. This phenomenon arises mainly from Kerala's unusually strong service sector.

Kerala's economy can be best described as a democratic socialist welfare economy. However, Kerala's emphasis on equitable distribution of resources has resulted in slow economic progress compared to neighboring states. Relatively few major corporations and manufacturing plants are headquartered in Kerala. Remittances from Keralites working abroad, mainly in the Middle East, make up over 20% of State Domestic Product (SDP).] Because of this Kerala Economy is sometimes called as "Money Order Economy".

Macro-economic trend

This is a chart of trend of gross state domestic product of Kerala at market prices estimated by Ministry of Statistics and Programme Implementation with figures in millions of Indian Rupees.
Year Gross State Domestic Product
1980 42,860
1985 75,200
1990 140,980
1995 387,620
2000 697,920


Kerala produces 96% of national output of pepper and 91% of natural rubber. Coconut, tea, coffee, cashew, and spices — including cardamom, vanilla, cinnamon, and nutmeg — comprise a critical agricultural sector. A key agricultural staple is rice, with some six hundred varieties grown in Kerala's extensive paddy fields.[4] Nevertheless, home gardens comprise a significant portion of the agricultural sector. Related animal husbandry is also important, and is touted by proponents as a means of alleviating rural poverty and unemployment among women, the marginalized, and the landless. Feeding, milking, breeding, management, health care, and concomitant micro-enterprises all provide work for around 32 lakh (3.2 million) of Kerala's 55 lakh (5.5 million) households. The state government seeks to promote such activity via educational campaigns and the development of new cattle breeds such as the "Sunandini".


Kerala is an established tourist destination for both Indians and non-Indians alike. Tourists mostly visit such attractions as the beaches at Kovalam, Cherai and Varkala, the hill stations of Munnar, Nelliampathi, and Ponmudi, and national parks and wildlife sanctuaries such as Periyar and Eravikulam National Park. The "backwaters" region — an extensive network of interlocking rivers, lakes, and canals that center on Alleppey, Kumarakom, and Punnamada — also see heavy tourist traffic. Examples of Keralite architecture, such as the Padmanabhapuram Palace, Padmanabhapuram, are also visited. Kochi, the commercial capital of the state, is known as the "Queen of the Arabian Sea". Alappuzha, the first planned town in Kerala, is called the "Venice of the East". Tourism plays an important role in the state's economy.

Foreign Remittances

In a state of 32 million where unemployment approaches 20 percent, one Keralite worker in six now works overseas. The largest number work in construction, although high literacy allows some Keralites to secure office work. Foreign remittances augment the state’s economic output by nearly 25 percent. Migrants’ families are three times as likely as those of nonmigrants to live in superior housing, and about twice as likely to have telephones, refrigerators and cars.


Kerala has 145,704 km of roads (4.2% of India's total). This translates into about 4.62 km of road per thousand population, compared to an all-India average of 2.59 km. Virtually all of Kerala's villages are connected by road. Traffic in Kerala has been growing at a rate of 10–11% every year, resulting in high traffic and pressure on the roads. Total road length in Kerala increased by 5% between 2003-2004. The road density in Kerala is nearly four times the national average, and is a reflection of Kerala's unique settlement patterns. India's national highway network includes a Kerala-wide total of 1,524 km, which is only 2.6% of the national total. There are eight designated national highways in the state. Upgrading and maintenance of 1,600 km of state highways and major district roads have been taken up under the Kerala State Transport Project (KSTP), which includes the GIS-based Road Information and Management Project (RIMS).

Kerala ranks second nationwide in diesel-based thermal electricity generation with national market share of over 21%.


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