Economy of Pondicherry

Pondicherry, a union territory of India has been defined as an administrative unit but its economy does not have an autonomous existence owing to its four separate geographical areas viz. Pondicherry and Karaikal in Tamil Nadu, Mahe in Kerala and Yanam in Andhra Pradesh.

The economy of each of these four sub-units is related to its respective state, and has little to do with the rest of the Union Territory as such. The two regions Mahe and Yanam are economically integrated with their respective states Kerala and Andhra Pradesh. Even in the case of Pondicherry, the land area is noncontiguous, since there are several enclaves of Pondicherry within Tamil Nadu.

The economy of Pondicherry can be characterized as an “open” economy with flows of virtually all factors of production including natural resources, labour, capital and technology.

Pondicherry’s financial flow not only takes place from adjoining states, but also from different parts of the country in various forms for investments, services, etc. There are also flow from outside the country due to both remittances from NRIs and pensions paid by the French Government.

The 'openness' of the economy is also reflected in the movement of goods and services both into and out of Pondicherry, particularly to the neighboring states. In the past, the low sales tax rates in the Union Territory led to the diversion of goods to and from Pondicherry. However, the imposition of the uniform floor rates will reduce the possibility of such diversion. The impact of this policy will be felt not only on government finances but may be to some extent on economic activity as a whole in the Union Territory.

This union territory is not very rich in mineral resources but has some land under forests. The sea is a major natural resource for the people for fishing which adds to the rural economy.