Kerala Economy

Since its incorporation as a state, Kerala's economy largely operated under welfare based democratic socialist principles. In recent years, the state has liberalised its increasingly mixed economy, allowing greater participation by the free market and foreign direct investment. Kerala's nominal gross domestic product (as of 2004-2005) is an estimated 89451.99 crore INR, while recent GDP 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 has clocked a 8.93% growth in enterprises from 1998 to 2005 compared with the national average of 4.80%. Nevertheless, relatively few major corporations and manufacturing plants choose to operate in Kerala. This is mitigated by remittances sent home by overseas Keralites, which contributes around 20% of state GDP. Kerala's per capita GDP of 11,819 INR is significantly higher than the all India average, although it still lies far below the world average. Additionally, Kerala's Human Development Index and standard of living statistics are the nation's best. This apparent paradox-high human development and low economic development-is often dubbed the Kerala phenomenon or the Kerala model of development, and arises mainly from Kerala's strong service sector.
The service sector (including tourism, public administration, banking and finance, transportation, and communications-63.8% of statewide GDP in 2002-2003) along with the agricultural and fishing industries (together 17.2% of GDP) dominate Kerala's 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 GDP) 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. Kerala's unemployment rate is estimated at 9.4%, although underemployment of those classified as "employed", low employability of many job-seeking youths, and a mere 13.5% female participation rate are significant problems. Estimates of the statewide poverty rate range from 12.71% to as high as 36%.