As the torrential rains abate in Kerala, the focus is slowly turning towards how the flood-hit state will rebuild its economy. Kerala, accounts for 2.8% of India’s population, but its economy contributes nearly 4% to the Indian economy. Thus, the southern state’s per capita income is 60% higher than India’s average. This has fuelled internal migration to Kerala for low-end jobs, even as Keralites have emigrated—mostly to the Gulf countries—in search of better-paying jobs. Unemployment was a major issue in the state, with educated youths unable to find a job.

Kerala’s GDP growth hasn’t always kept up with India’s...

Between 2011-12 and 2016-17, the Kerala economy grew at a much slower rate than India’s GDP growth rate. The state grew at a compounded annual growth rate of 5.72%, as compared to 6.9% for India. In absolute terms, Kerala’s gross domestic product (GDP) stands at 6.17 trillion.

...but per capita income has always been higher

Ranked 12th in terms of population, and eighth in terms of economy, Kerala is relatively wealthier than the rest of India on per capita income basis.

So, what’s driving the Kerala economy?

In the last decade or so, Kerala has been trying to expand its economy by investing in new sectors, such as information technology and business process management services. It has also been trying to get its startup economy going. However, as things stand, construction and real estate activities are the two major drivers of the economy. Manufacturing accounts for less than 10% of the economy.

Unemployment rates

Even with the services sector contributing more than 50% of the economy, Kerala has been finding it hard to create enough job opportunities. Outside of the northeastern states, Kerala has the highest unemployment rate in India with only 20% of all households having availed state-run employment guarantee schemes, according to the latest Employment and Unemployment Survey.

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