Lakshadweep is the India's smallest Union Territory, known for its chain of coral islands. There are 36 islands (three reefs and six submerged sandy banks) in all, of which 10 are inhabited and scattered in the Arabian Sea at 220-440 kms off the west coast of Kerala.

In Lakshadweep, tourism is one of the few areas that can play a vital role in generating revenue, jobs and overall island growth. Lakshadweep is already recognised as a tourist destination because of its isolated islands and scenic beauty. In the Budget 2025-26, Lakshadweep was allocated Rs. 2.74 crore (US$ 321,031.04) for tourism development in the union territory.

Bangaram is forecasted to be a key international tourism destination because of its abundant marine fauna and activities like water sports such as scuba diving, windsurfing, snorkelling, surfing, kayaking, canoeing, water skiing, yachting, and evening trips to the sea.

As of March 2025, Lakshadweep had a total installed power generation capacity of 31.80 MW. With the SunSource Energy power plant project, Lakshadweep is witnessing its largest solar project that will power four different islands - Agatti, Kavaratti, Bangaram and Thinnakara.

Below are some of the major initiatives taken by the Government to promote Lakshadweep as an investment destination:

• Starting in 2025, construction activities across key islands like Kalpeni, Kadmath, and Androth will commence, with Cochin Port Authority as project management consultant and Assystem India Limited responsible for detailed project reporting.
• Budget 2025–26 emphasizes sustainable deep-sea fishing in India’s 20 lakh sq. km EEZ, focusing on Lakshadweep and A&N Islands to unlock the 53 lakh tonne marine potential, especially high-value tuna, through capacity building and support for resource-specific fishing vessels.
• The Ministry of Tourism has revamped the Swadesh Darshan Scheme as Swadesh Darshan 2.0 (SD 2.0) with the objective to develop sustainable and responsible tourism destinations, following a destination & tourism-centric approach and has notified 57 destinations in the country including Lakshadweep for development under SD 2.0.
• Prime Minister, Mr. Narendra Modi inaugurated, development projects worth more than Rs. 1,150 crore (US$ 138.06 million) in Kavaratti, Lakshadweep. The development projects cover a wide range of sectors including technology, energy, water resources, healthcare and education.
• The government of India has outlined a comprehensive Rs. 3,600 crore (US$ 432.17 million) infrastructure upgrade plan aimed at transforming the Lakshadweep islands into a premier tourist destination.
• Over 6 opportunities in waste and water sector worth US$ 7.22 million.
• In July 2022, the Shipping Corporation of India took over the running and maintenance of ships of the Lakshadweep Islands to increase shipping efficiency and improve operations.
• In May 2022, a Rs. 61 crore (US$ 7.47 million) telecom infrastructure plan for the Lakshadweep Islands that consists of 225 kilometres of optical fibre internet access and new 4G towers was approved by the Department of Telecommunications.
• In April 2022, the Lakshadweep Administration declared the Wednesday of every week as a 'Cycle Day' for government employees, which will help curb pollution and decrease the carbon footprint of the union territory.
• In January 2022, the Electricity Department of Lakshadweep invited bids to acquire its distribution company (DISCOM), which is responsible for electricity distribution and retail supply. The winning bidder will also be responsible for developing clean energy projects in the union territory.
• In October 2021, the submarine optical fibre cable (OFC) project was awarded to Japanese conglomerate NEC’s Indian subsidiary.
• In September 2021, large-scale farming of indigenous seaweeds was launched in nine inhabited islands of Lakshadweep under the guidance of Central Marine Fisheries Research Institute (CMRI). The plan is to produce 30,000 tonnes in a year, which will be worth Rs. 75 lakh (US$ 98,120).
• In March 2021, the Ministry of Earth Sciences announced that India and Norway have agreed to jointly work in the area of marine spatial planning in the oceanic space for the next five years. The agreement is a part of the ‘Indo-Norway Integrated Ocean Initiative’, wherein Lakshadweep and Puducherry have been identified as the pilot sites for the project. The Government of India's initial investment for undertaking studies and planning are estimated to be Rs. 9 crore (US$ 1.38 million) annually.
• In February 2021, the UT, in its proposal to the Ministry of Home Affairs, announced its plans to dedicate a tourist ship in the islands with the aim of developing cruise tourism and generate employment opportunities.
• In January 2021, the Ministry of Ports, Shipping and Waterways (MoPSW) began operations of seaplane services on select routes under a special purpose vehicle (SPV) framework through prospective airline operators. The proposed origin-destination pairs include Lakshadweep and the Andaman & Nicobar Islands. The project execution and implementation would be through Sagarmala Development Company Ltd. (SDCL), which is under the administrative control of the ministry.