Economy
After independence, the state was managed as a democratic socialist welfare economy. From the 1990s, liberalisation of the mixed economy allowed Licence Raj restrictions against capitalism and foreign direct investment to be lightened, leading to economic expansion and an increase in employment. In the fiscal year 2018–19, the nominal gross state domestic product (GSDP) was ₹7.82 lakh crore (US$100 billion). GSDP growth; 11.4% in 2018–2019 and 10.5% in 2017–2018 had been high compared to an average of 2.3% annually in the 1980s and between 5.1% and 6.0% in the 1990s. The state recorded 8.9% growth in enterprises from 1998 to 2005, higher than the national rate of 4.8%.The "Kerala phenomenon" or "Kerala model of development" of very high human development and in comparison low economic development has resulted from a strong service sector. In 2019–20, the tertiary sector contributed around 63% of the state's GSVA, compared to 28% by secondary sector, and 8% by primary sector. In the period between 1960 and 2020, Kerala's economy was gradually shifting from an agrarian economy into a service-based one.
The state's service sector which accounts for around 63% of its revenue is mainly based upon Hospitality industry, Tourism, Ayurveda & Medical Services, Pilgrimage, Information technology, Transportation, Financial sector, and Education. Major initiatives under the industrial sector include Cochin Shipyard, Shipbuilding, Oil refinery, Software Industry, Coastal mineral industries, food processing, marine products processing, and Rubber based products. The primary sector of the state is mainly based upon Cash crops. Kerala produces a significant amount of national output of the cash crops such as Coconut, Tea, Coffee, pepper, Natural rubber, Cardamom, and Cashew in India. The cultivation of food crops began to reduce since 1950's The Migrant labourers in Kerala are a significant workforce in its industrial and agricultural sectors. Being home to only 1.18% of the total land area of India and 2.75% of its population, Kerala contributes more than 4% to the Gross Domestic Product of India.
Kerala's economy depends significantly on emigrants working in foreign countries, mainly in the Arab states of the Persian Gulf, and the remittances annually contribute more than a fifth of GSDP. The state witnessed significant emigration during the Gulf Boom of the 1970s and early 1980s. In 2008, the Persian Gulf countries together had a Keralite population of more than 25 lakh(2.5 million), who sent home annually a sum of US$6.81 billion, which is the highest among Indian states and more than 15.1% of remittances to India in 2008. In 2012, Kerala still received the highest remittances of all states: US$11.3 billion, which was nearly 16% of the US$71 billion remittances to the country. In 2015, NRI deposits in Kerala have soared to over ₹1 lakh crore (US$13 billion), amounting to one-sixth of all the money deposited in NRI accounts, which comes to about ₹7 lakh crore (US$92 billion). Malappuram district has the highest proportion of emigrant households in state. A study commissioned by the Kerala State Planning Board, suggested that the state look for other reliable sources of income, instead of relying on remittances to finance its expenditure.
A decline of about 300,000 in the number of emigrants from the state was recorded during the period between 2013 and 2018. The total remittances received by the emigrants stood at ₹85,100 crore (US$11 billion) in the year 2018. According to a study done in 2013, ₹17,500 crore (US$2.3 billion) was the total amount paid to migrant labourers in the state every year. The tertiary sector comprises services such as transport, storage, communications, tourism, banking, insurance and real estate. In 2011–2012, it contributed 63.2% of the state's GDP, agriculture and allied sectors contributed 15.7%, while manufacturing, construction and utilities contributed 21.1%.Around 600 varieties of rice, which is Kerala's most used staple and cereal crop, are harvested from 3105.21 km2; a decline from 5883.4 km2 in 1990. 6,88,859 tonnes of rice are produced per year. 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.
As of March 2002, Kerala's banking sector comprised 3341 local branches: each branch served 10,000 people, lower than the national average of 16,000; the state has the third-highest bank penetration among Indian states. On 1 October 2011, Kerala became the first state in the country to have at least one banking facility in every village. Unemployment in 2007 was estimated at 9.4%; chronic issues are underemployment, low employability of youth, and a low female labour participation rate of only 13.5%,as was the practice of Nokku kooli, "wages for looking on". By 1999–2000, the rural and urban poverty rates dropped to 10.0% and 9.6%, respectively.
The Grand Kerala Shopping Festival (GKSF) was started in 2007, covering more than 3000 outlets across the nine cities of Kerala with huge tax discounts, VAT refunds and huge array of prizes. Lulu International Mall at Thiruvananthapuram is the largest Shopping Mall in India.
The state's budget of 2020–2021 was ₹1.15 lakh crore (US$15 billion). The state government's tax revenues (excluding the shares from Union tax pool) amounted to ₹67,420 crore (US$8.8 billion) in 2020–21; up from ₹55,671 crore (US$7.3 billion) in 2019–20. Its non-tax revenues of the Government of Kerala reached ₹14,587 crore (US$1.9 billion) in 2020–2021. However, Kerala's high ratio of taxation to GSDP has not alleviated chronic budget deficits and unsustainable levels of government debt, which have impacted social services. A record total of 223 hartals were observed in 2006, resulting in a revenue loss of over ₹2,000 crore (US$260 million). Kerala's 10% rise in GDP is 3% more than the national GDP. In 2013, capital expenditure rose 30% compared to the national average of 5%, owners of two-wheelers rose by 35% compared to the national rate of 15%, and the teacher-pupil ratio rose 50% from 2:100 to 4:100.
The Kerala Infrastructure Investment Fund Board is a government owned financial institution in the state to mobilize funds for infrastructure development from outside the state revenue, aiming at overall infrastructure development of the state. In November 2015, the Ministry of Urban Development selected seven cities of Kerala for a comprehensive development program known as the Atal Mission for Rejuvenation and Urban Transformation (AMRUT). A package of ₹2.5 million (US$33,000) was declared for each of the cities to develop service level improvement plan (SLIP), a plan for better functioning of the local urban bodies in the cities of Thiruvananthapuram, Kollam, Alappuzha, Kochi, Thrissur, Kozhikode, and Palakkad.
Despite of many achievements, Kerala facing many challenges like high levels of unemployment that disproportionately impact educated women, a high degree of global exposure and a very fragile environment.