Economy

Since independence, Kerala was managed as a democratic socialist welfare economy. Since the 1990s, liberalisation of the mixed economy allowed onerous Licence Raj restrictions against capitalism and foreign direct investment to be lightened, leading to economic expansion and job creation. In fiscal year 2007-2008, nominal gross state domestic product (GSDP) was 162,414.79 crore (US$36.06 billion). Recent GSDP growth (9.2% in 2004–2005 and 7.4% in 2003–2004) has been robust compared to historical averages (2.3% annually in the 1980s and between 5.1% and 5.99% in the 1990s). The state clocked 8.93% growth in enterprises from 1998 to 2005 compared with 4.80% nationally. Relatively few such enterprises are major corporations or manufacturers.Kerala's Human Development Index rating is the highest in India. This apparently paradoxical "Kerala phenomenon" or "Kerala model of development" of high human and low economic development results from the strong service sector. Kerala's economy depends on emigrants working in foreign countries (mainly in the Persian Gulf countries such as United Arab Emirates or Saudi Arabia) and remittances annually contribute more than a fifth of GSDP. As of 2008, the Gulf countries altogether have a Keralite population of more than 2.5 million, who send home annually a sum of USD 6.81 billion, which is more than 15.13% of Remittance to India in 2008.

A building in the Infosys-Thiruvananthapuram campus

Rural women processing coir threads

The service sector (including tourism, public administration, banking and finance, transportation, and communications—63.8% of GSDP in 2002–2003) and the agricultural and fishing industries (together 17.2% of GSDP) dominate the economy. Nearly half of Kerala's people are dependent on agriculture alone for income. Some 600 varieties of rice (Kerala's most important staple food and cereal crop) are harvested from 3105.21 km² (a decline from 5883.4 km² in 1990) of paddy fields; 688,859 tonnes are produced per annum. Other key crops include coconut (899,198 ha), tea, coffee (23% of Indian production, or 57,000 tonnes), rubber, cashews, and spices—including pepper, cardamom, vanilla, cinnamon, and nutmeg. Around 1.050 million fishermen haul an annual catch of 668,000 tonnes (1999–2000 estimate); 222 fishing villages are strung along the 590 km coast. Another 113 fishing villages dot the hinterland.

Traditional industries manufacturing such items as coir, handlooms, and handicrafts employ around one million people. Around 180,000 small-scale industries employ around 909,859 Keralites; 511 medium and large scale manufacturing firms are located in Kerala. A small mining sector (0.3% of GSDP) involves extraction of ilmenite, kaolin,bauxite, silica, quartz, rutile, zircon, and sillimanite. Home gardens and animal husbandry also provide work for hundreds of thousands of people. Other major sectors are tourism, manufacturing, and business process outsourcing. As of March 2002, Kerala's banking sector comprised 3341 local branches; each branch served 10,000 persons, lower than the national average of 16,000; the state has the third-highest bank penetration among Indian states. Unemployment in 2007 was estimated at 9.4%; underemployment, low employability of youths, and a 13.5% female participation rate are chronic issues. Poverty rate figures range from 12.71% to as high as 36%. More than 45,000 residents live in slum conditions.

The state treasury has suffered loss of thousands of millions of rupees thanks to the state staging over 100 hartals annually in recent times. A record total of 223 hartals were observed in 2006, resulting in a revenue loss of over 2000 crore.

Vikram Sarabhai Space Centre (VSSC), a major space research centre of the Indian Space Research Organisation (ISRO) is located in Thiruvananthapuram. A second missile making unit of BrahMos Aerospace Private Limited named BrahMos Aerospace Thiruvananthapuram Ltd is also in Thiruvananthapuram, Kerala.