Economy of Kerala

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A house Boat View from Vambanad Lake

Service industry dominates the Kerala economy.[1] Kerala's per capita GDP is Rs. 74,620.[2] Kerala's low GDP and productivity figures juxtaposed with higher development figures than in most Indian states 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 land reforms, social upliftment of entire communities and reforms introduced by the communist party which held the state for a long period of time.[3] Some describe Kerala's economy as a "democratic socialist welfare state". Some, such as Financial Express, use the term "Money Order Economy".[4] Kerala's economic progress is above the national average, but relatively few major corporations and manufacturing plants are headquartered in Kerala.

Around 3,000,000 Keralites are working abroad, mainly in Persian Gulf; to where migration started with the Gulf Boom. The Kerala Economy is therefore largely dependent on trade in services and resulted remittances.[5][6][7] In 2012, the state was the highest receiver of overall remittances to India which stood at Rs.49,965 Crore (31.2% of the State's GDP), followed by Tamil Nadu, Punjab and Uttar Pradesh.[8] S. Irudaya Rajan describes the situation as "Remittances from global capitalism are carrying the whole Kerala economy".[5] Unemployment recently dropped from a large 19.1% in 2003 to 9.4% in 2007 and only 4.2% in 2011 .[9] Underemployment, low employability of youths, and a 13.5% female participation rate are chronic issues.[10]:5, 13[11]

Macro-economic trend[edit]

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.Kerala had recorded a growth rate of 6.49 per cent in 2013, which was above the national average (4.04) and the second highest among South Indian States. The state’s growth rate was above that of Karnataka (5.79 per cent) and Andhra Pradesh (5.97 per cent).

Year Gross State Domestic Product
1980 42,860
1985 75,200
1990 140,980
1995 387,620
2000 697,920
2005 1,025,080[12]

The state's debt was estimated at 29.53 per cent of GDP in 2013.[13]


The countryside of Wayanad.

Kerala produces 97% of national output of pepper and accounts for 85% of the area under natural rubber in the country.[14] 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.[15] 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 marginalised, and the landless. Feeding, milking, breeding, management, health care, and concomitant micro-enterprises all provide work for around 3.2 million of Kerala's 5.5 million households.[citation needed] The state government seeks to promote such activity via educational campaigns and the development of new cattle breeds such as Sunandini.


Per capita & Consumption of alcoholic beverages in Kerala for the year of 2010

The government enforces state monopoly over liquor sale in the state, after the state banned foreign liquor shops, through the government owned Kerala State Beverages Corporation (KSBC). Every year, liquor sales have been rising and the total sales of liquor and beer during 2010-11 fiscal year was expected to be about Rs. 67 billion.[16]

The government applies the highest state tax on liquor (around 120%). The total revenue from taxes on liquor was Rs. 55.39 billion in 2009-10. Kerala has the highest per capita consumption, over eight litres (1.76 gallons) per person per year, in the nation, overtaking traditionally hard-drinking states like Punjab and Haryana. Rum and brandy are the preferred drinks in Kerala in a country where whisky outsells every other liquor. Taxes on alcohol was a major source of revenue for the state government, but of late, it has been showing a declining trend. Only 4.2% of revenues for its annual budget come from liquor sales. Revenues from alcohol to the state's exchequer have registered a 100% rise over the past four years.[17]


Main article: Tourism in Kerala

Kerala is an established tourist destination for both Indians and non-Indians alike. Tourists mostly visit Trivandrum, Kovalam, Cheruthuruthi, Cherai, Kappad, Muzhappilangad Beach and Varkala, the hill stations of Munnar, Nelliampathi, Wayanad 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 Veli, Akkulam, Alleppey, Kumarakom, and Punnamada – also see heavy tourist traffic. Examples of Keralite architecture, such as the Padmanabhapuram Palace, Malik Deenar Mosque Kasaragod, Paradesi Synagogue are also visited. Trivandrum has the highest number of international and domestic tourist arrivals in Kerala.[18] And the major city in kerala known as Trivandrum, Other cities like Kozhikode (Land of Zamorins) and Alappuzha(called the "Venice of the East") are also popular destinations. Tourism plays an important role in the state's economy. Kerala is also a preferred destination for night dwellers and the nightlife districts in Trivandrum, Kovalam, Poovar, Varkkala and Ponmudi are the major centres. Kovalam Beaches is ranked second in India after Goa in terms of the number of International visitors and in terms of Western Music festivals.

With the rise of Technopark, Trivandrum City has witnesses a massive increase in the number of pubs, clubs and bars and now has the most number of pubs in Kerala. With international beaches in Kovalam and Varkala and highland tourist centres like Ponmudi and Agastyamala, Trivandrum Districts contributes to around 34% of Kerala's Tourist revenues followed by Ernakulam, Alappuzha and Kollam. Trivandrum also ranks second in India after Panjim district in district wise revenue from Tourism.

BSE listed Kerala companies[edit]

  1. State Bank of Travancore
  2. Federal Bank
  3. Dhanlaxmi Bank
  4. South Indian Bank
  5. Cochin Minerals and Rutile Limited
  6. Kerala Solvent Extractions Ltd
  7. Manappuram General Finance and Leasing Ltd
  8. Muthoot Finance
  9. Harrisons Malayalam
  10. ESAF Microfinance and Investments
  11. Accel Transmatic Limited
  12. Geojit BNP Paribas Financial Services Limited
  13. GTN Textiles Limited
  14. Kitex Garments
  15. Nitta Gelatin India Ltd
  16. Eastern Traders
  17. Rubfila International LTD
  18. Kerala Ayurveda Ltd
  19. Vertex Securities Ltd
  20. V-Guard Industries Ltd
  21. Sree Sakthi Paper Mills
  22. AVT Natural Products

Foreign remittances[edit]

In a state of 32 million where unemployment approaches 20 percent, one out of six employed Keralite now works overseas. 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 9.25 billion,[19] which is more than 15.13% of Remittance to India in 2008. Large numbers work in construction. High literacy allows Keralites to secure administrative employment & white collar jobs. 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.[20] Pathanamthitta and Thrissur districts have on an average one member from each household a non-resident Indian.

Of the $71 billion in remittances sent to India in 2012, Kerala still received the highest among the states: $11.3 billion, which is nearly 16%.[21]

According to a study commissioned by the Kerala State Planning Board, the state should look for other reliable sources instead of relying on remittances to finance its expenditure.[22]


Kerala is the single largest originator of education loans for the country as a whole.Total disbursal of education loans amount to Rs. 60 billion.[23]


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%.

See also[edit]


  1. ^ [1] Archived 3 December 2008 at the Wayback Machine.
  2. ^ States of India by size of economy
  3. ^
  4. ^ "Cashing out of the money order economy". 
  5. ^ a b Deparle, Jason (7 September 2007). "Jobs Abroad Support 'Model' State in India". New York Times. Retrieved 1 May 2010. 
  6. ^ K.P. Kannan, K.S. Hari (2002). "Kerala's Gulf connection: Emigration, remittances and their macroeconomic impact 1972-2000". 
  7. ^ S Irudaya Rajan, K.C. Zachariah (2007). "Remittances and its impact on the Kerala Economy and Society" (PDF). 
  8. ^ "NRIs beat FDI, keep the money coming". Hindustan Times. 8 October 2012. Retrieved 2014-07-09. 
  9. ^ Kumar KG (8 October 2007). "Jobless no more?". The Hindu. A study by K.C. Zacharia and S. Irudaya Rajan, two economists at the Centre for Development Studies (CDS), Thiruvananthapuram, unemployment in Kerala has dropped from 19.1[%] in 2003 to 9.4[%] in 2007. 
  10. ^ Nair NG. Nair PRG, Shaji H, ed. Measurement of Employment, Unemployment, and Underemployment (PDF). Kerala Research Programme on Local Level Development. Thiruvananthapuram: Centre for Development Studies. ISBN 81-87621-75-3. Retrieved 31 December 2008. 
  11. ^ Government of Kerala 2004, p. 4.
  12. ^ "Kerala economy climbs to $23b by 2005". 31 March 2009. Retrieved 23 March 2012. 
  13. ^ Nandakumar, T (10 Jul 2014). "Kerala can bear rising debt burden: Mani". The Hindu. Retrieved 29 Dec 2015. 
  14. ^ [2] Archived 27 March 2010 at the Wayback Machine.
  15. ^ (Sreedharan 2004, p. 5).
  16. ^ "Bevco pockets Rs.600 crore in December". The Hindu. Chennai, India. 5 January 2011. 
  17. ^ "Official web site of Kerala State Beverages Corporation Limited". Retrieved 23 March 2012. 
  18. ^ "Tourist statistics – 2008" (PDF). Government of Kerala, Tourism Department. Retrieved 6 June 2014. 
  19. ^ GCC residency cap may force lakhs to return by Biju Govind; The Hindu - Tuesday, 19 Aug 2008
  20. ^ (DeParle 2007).
  21. ^ "Remittances: Kerala drives dollar flows to India". Yahoo! Finance. 5 November 2013. Retrieved 8 November 2013. 
  22. ^ "High time Kerala looked beyond remittance income, says study". Deccan Chronicle. 4 November 2013. Retrieved 8 November 2013. 
  23. ^ Our Bureau (13 March 2012). "Business Line : OTHERS / STATES : Kerala largest originator of education loans". Retrieved 23 March 2012. 


External links[edit]