After independence, the state was managed as a democratic socialist welfare economy. From the 90s, liberalisation of the mixed economy allowed onerous Licence Raj restrictions against capitalism and foreign direct investment to be lightened, leading to economic expansion and increase in employment. In the fiscal years 2007–2008, the nominal gross state domestic product (GSDP) was 162,414.79 crore (US$28 billion). GSDP growth; 9.2% in 2004–2005 and 7.4% in 2003–2004 had been high compared to average of 2.3% annually in the 80s and between 5.1% and 5.99% in the 90s. The state recorded 8.93% growth in enterprises from 1998 to 2005, higher than the nation's rate of 4.80%. Human Development Index rating is the highest in India; 0.790. This apparently paradoxical "Kerala phenomenon" or "Kerala model of development" of very high human development and not much high economic development resulted due to a stronger 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 had a Keralite population of more than 2.5 million, who send home annually a sum of US$6.81 billion, which is more than 15.13% of remittance to India in 2008; the highest among Indian States.
The service sector; including tourism, public administration, banking and finance, transportation, and communications accounted for 63.8% of the GSDP in 2002–2003 while the agricultural and fishing industries had together 17.2% of the GSDP. Nearly half of Kerala's people are dependent on agriculture alone for income. Around 600 varieties of rice which are Kerala's most important staple food and cereal crop are harvested from 3105.21 km2; a decline from 5883.4 km2 in 1990. While, 688,859 tonne paddy 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 as of 1999–2000 estimate; 222 fishing villages are strung along the 590 km coast. Another 113 fishing villages dot the hinterland. Kerala's coastal belt of Karunagappally is known for high background radiation from thorium-containing monazite sand. In some coastal panchayats, median outdoor radiation levels are more than 4 mGy/yr and, in certain locations on the coast, it is as high as 70 mGy/yr.
Traditional industries manufacturing items; 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 of 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 many 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. 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%; underemployment, low employability of youths, and a 13.5% female participation rate are chronic issues, as is 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) claimed to be Asia's largest shopping festival was started in the year 2007. Since then it has become an annual shopping event being conducted in the December–January period. During this period stores and shops registered under the GKSF offer wide range of discounts, vat refunds etc. Along with the guaranteed shopping experience, shoppers are provided with gift coupons for a fixed worth of purchase entering them into weekly and mega lucky draws. As compared to shopping festivals being held in other countries, this Festival converts the entire state of Kerala into a giant shopping mall, incorporating not just the big players, but also the small and medium scale industries.
The state's budget of 2012–2013 is 481.42 billion. The state government's tax revenues (excluding the shares from Union tax pool) amounted to 217.22 billion in 2010–2011; up from 176.25 billion in 2009–2010. Its non-tax revenues (excluding the shares from Union tax pool) of the Government of Kerala reached 19,308 million in 2010–2011. 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 2000 crore.
Agriculture A typical paddy field in KeralaAgriculture in Kerala has passed through many changing phases. The major change occurred in the 1970s, when production of rice reduced due to increased availability of rice supply all over India and decreased availability of labour supply. Consequently, investment in rice production decreased and a major portion of the land was shifted for the cultivation of perennial tree crops and seasonal crops. Profitability of crops is reducing due to shortage of farm labourers, the high price of land and the uneconomic size of operational holding areas.
Kerala produces 97% of the national output of black pepper and accounts for 85% of the area under natural rubber in the country. Coconut, tea, coffee, cashew, and spices—including cardamom, vanilla, cinnamon, and nutmeg—comprise a critical agricultural sector. The key agricultural staple is rice, with varieties grown in extensive paddy fields. 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. The state government promotes these activity via educational campaigns and the development of new cattle breeds such as the Sunandini.
A scenic landscape, with water filled paddy fields. Fisheries A fisherman in rural KeralaWith 590 km of coastal belt, 400,000 hectares of inland water resources and about 220,000 active fishermen, Kerala is one of the leading producers of fish in India. According to 2003–04 reports, about 1.1 million people earn their livelihood from fishing and allied activities such as drying, processing, packaging, exporting and transporting fisheries. The annual yield of the sector was estimated as 608,000 tons in 2003–04. This contributes to about 3% of the total economy of the state. In 2006, about 22% of the total Indian marine fishery yield was from the state. During the southwest monsoon, a suspended mud bank would be developed along the shore, which in turn leads to calm ocean water and hence peak output from the fishery industry. This phenomenon is locally called chakara. The fish landings consist of a large variety: pelagic species; 59%, demersal species; 23%, crustaceans and molluscs.
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