Kerala is renowned for its diverse geographical features of stunning beaches, backwaters, hill stations, forests, and wildlife, and has become one of Asia's most sought-after destinations for tourists. Tourism forms the core of Kerala’s economic progress, contributing significantly to the state's economy. Today, Kerala is identified worldwide for its tourism offerings. The sector promotes balanced and sustainable regional development by generating income through foreign exchange earnings and creating job opportunities, particularly in trade, transportation, and hospitality.
Kerala’s economy and tourism
In 2019, 11,89,771 foreign tourists visited Kerala. However, due to the Covid-19 pandemic, there was a decrease in foreign tourist’s arrivals over the next two years. In 2022, the state received 3,45,000 foreign visitors, and by June 30, 2023, Kerala recorded 287,730 foreign tourists in the first six months of 2023, demonstrating a recovery in tourism. The growth rate for international tourists in Kerala has been higher than the national average. Additionally, domestic tourism recovered significantly, with 18,867,414 domestic visitors in 2022, up 150.31% from 2021 (following a 72.86% drop in 2020 from 18,384,233 domestic tourists in 2019 due to the COVID-19 pandemic).
Tourism has been a top contributor to the economy of Kerala for decades. The total direct and indirect revenue has slowly progressed to reach the pre-pandemic levels, standing at Rs. 35,168.42 crore (US$ 4.41 billion) in 2022 compared to Rs. 45,010.69 crore (US$ 6.44 billion) in 2019. Foreign exchange earnings stood at Rs. 2,792.42 (US$ 349.84 million) in 2022 compared to Rs. 10,271.06 crore (US$ 1.47 billion) in 2019. Similarly, domestic tourist earnings touched Rs. 24,588.96 crore (US$ 3.08 billion) in 2022 against Rs. 24,785.62 crore (US$ 3.55 billion) in 2019.
Kerala state government aims to increase the contribution of tourism to GDP from 12% in 2023 to 20% by the year 2030 and to boost tourism it is implementing master plan “Mission 2030”. This initiative will focus on increasing private investment in the state and fostering partnership with private players to explore growth potential in Heli Tourism and Cruise Tourism which will add more diversity to the state tourism industry.
Source: Department of Tourism, Government of Kerala, Data is in calendar years
Drivers of tourism in Kerala
Industrial development
In the States’ Startup Ranking by the Union Ministry of Commerce and Industry 2022 Kerala was awarded the best performer, specifically standing out in the micro, small, and medium enterprises (MSME) sector. The state witnessed the successful launch of 100,000 new businesses within just the first eight months of 2022–23. This initiative continued into 2023–24, resulting in the launch of 214,564 enterprises with an investment of Rs. 13,474.52 crore (US$ 1.63 billion). This significant growth in the MSME sector has created 456,913 jobs across the state.
Kerala Share of agriculture and allied sectors in GSVA stood at 8.52% in the year 2022-23 (QE) while the construction and manufacturing contributed 13.7% and 13.0% to the total GSVA in 2022-23 (QE), respectively, providing state with more diversified source of revenue and its growth.
From past four years Kerala's manufacturing sector has been growing constantly. As per quick estimates from the DES (Department of Economics and Statistics), the Gross State Value Added (GSVA) for the manufacturing sector at constant prices (2011–12) rose 8.9% in 2022–23 compared to the previous year. GSVA from manufacturing increased to Rs. 69,226.37 crore (US$ 8.81 billion) in 2022–23 from Rs. 36,680.87 crore (US$ 4.67 billion) in 2013–14, contributing 13.00% and 9.51%, respectively to Kerala's GSVA at constant and current prices.
Kerala has a demographic advantage in fisheries. With a coastline of 590 kilometres and a continental shelf of 39,139 square kilometres, it is in one of the most productive regions of the Arabian Sea. The state’s inland fish production stood at 2.29 lakh metric tons, and marine fish production at 6.90 lakh metric tons in 2022–23. In 2021–22, it stood at 2.25 lakh metric tons of inland fish production and 6.01 lakh metric tons of marine production.
As per the MSME Annual Report 2022–23, 5.62% to the total MSME enterprises operating in India are from Kerala. It ranked 12th in the number of MSME business in India. The state is renowned for its unique combination of traditional and modern industries, surrounded by sectors like agriculture, tourism, IT, and healthcare.
The agricultural sector in Kerala is estimated to contribute 11% to the economy in 2022–23. Its fertile land provides a wide range of crops, providing sufficient opportunities to value addition. Coconut, the most cultivated crop in Kerala, is cultivated over 781,000 hectares and yields 5,384 million nuts. Also, Kerala is famous for its 'Nendran' banana variety, grown on 57,000 hectares, with a production of 489,000 metric tons.
The IT sector in Kerala plays a vital role in the state’s development. The government has drawn its attention towards providing the best infrastructure and enhance digital capabilities, which lead to successful e-Governance initiatives and IT projects. With a skilled workforce, favourable policies, and affordable operational costs, Kerala has become an attractive IT hub. High mobile and broadband penetration, along with strong literacy rates, further support the state's growth in the national IT landscape.
Source: Technopark
Government initiatives
Kerala’s Chief Minister Mr. Pinarayi Vijayan announced the Union Cabinet's approval for a new industrial city in Palakkad, part of a national initiative to boost manufacturing. The state has acquired 1,710 acres of land, with an estimated investment of Rs. 28,602 crore (US$ 3.44 billion) under the National Industrial Corridor Development Programme.
Launched in September 2015 under Section 8 of the MSME Development Act of 2006, the UAM scheme significantly enhances the ease of doing business for MSMEs. Entrepreneurs can quickly obtain a unique Udyog Aadhaar Number (UAN) by simply submitting an online entrepreneurs’ memorandum. This process relies on self-certification, eliminating the need for supporting documents.
The Responsible Tourism concept in Kerala is built on three pillars: Economic, Socio-Cultural, and Environmental Responsibility, collectively known as the Triple Bottom Line approach. The Kerala RT Mission serves as the state’s nodal agency to promote and implement Responsible Tourism initiatives. Its primary goals include leveraging tourism for local community development, poverty alleviation, and women’s empowerment, while also enhancing the livelihoods of farmers and artisans and fostering social and environmental balance.
Challenges
Kerala encounters few challenges in tourism and industrial development, still these are providing the state an opportunity for growth. As Kerala is dependent on the tourism sector as a contributor to the economy the seasonality of tourism presents a unique challenge which need to resolve by diversifying attractions and create year-round offerings to attract tourist all over the year. Infrastructure limitations underscore the necessity for investment in enhanced transportation and accommodation facilities and environmental concerns can inspire sustainable practices, boosting the state’s appeal to eco-conscious travellers. In the industrial sector, low productivity and land scarcity highlight opportunities for innovation and modernization. By strategically addressing these challenges, Kerala can not only enhance its competitiveness but also foster sustainable economic growth.
Conclusion
Kerala's rich tourism sector and succeeding industries play an important part in its economy. With growing tourist arrivals and revenue generation, tourism continues to be a key driver of Kerala's economic landscape, promoting job creation and supporting various sectors. Moreover, Kerala government focus on the environmental practices and responsible tourism initiatives preserves that economic growth does not come at the expense of the environment. The government’s active approach to industrial development, particularly in the MSME sector and IT, improves the state’s economic strength and competitiveness by expanding attractions, investing in infrastructure and embracing innovation, Kerala can not only improve its position as a premier tourist destination but also edge the way for sustainable economic growth.