Kerala's economy is highly service-oriented, with the tertiary sector contributing the lion's share to the state's Gross State Domestic Product (GSDP). The economy relies heavily on remittances sent by the large diaspora of Keralites working abroad, particularly in the Gulf Cooperation Council (GCC) countries. These remittances fuel high domestic consumption, real estate, and retail sectors.
While per capita income is higher than the national average, the state faces challenges with unemployment among the highly educated youth and a relatively high cost of living compared to neighboring states.
In recent years, the government has focused heavily on transitioning toward a knowledge-based economy. There is a strong emphasis on IT, biotechnology, ecotourism, and startups to drive future economic development and offset the historical lack of large-scale heavy manufacturing.