Economy of Pondicherry

Pondicherry Union Territory has been defined as an administrative unit, it is difficult to clearly delineate the economy as an autonomous entity. The Union Territory consists of four separate geographical areas, viz. Pondicherry and Karaikal near TamilNadu, Mahe in Kerala and Yanam in Andhra Pradesh.

The economy of each of these four sub-units is related to its hinterland in the respective state, and has little to do with the rest of the Union Territory as such. This is particularly true of Mahe and Yanam which are economically integrated with Kerala and Andhra Pradesh, and cannot be said to have an autonomous existence. Even in the case of Pondicherry, the land area is noncontiguous, since there are several enclaves of Pondicherry within Tamil Nadu.

Consequently, the Pondicherry economy can be characterized as an “open” economy with flows of virtually all factors of production including natural resources, labour, capital and technology. Land and water management in Tamil Nadu affect Pondicherry and Karaikal. Karaikal is located in the delta of the Cauvery, and is directly dependent on the flows in the Cauvery. Similarly, both surface and ground water use in the proximity of Pondicherry would affect availability. Agriculture and land use cannot be conceived in isolation from the adjoining areas of Tamil Nadu, Kerala and Andhra Pradesh.

A very mobile factor of production is labour which moves freely between the adjoining states and the administrative units of the Union Territory depending on the availability of employment, both seasonal and permanent. This is clear from the demographic profile of Pondicherry. Migration from outside the Union Territory accounted for 25 per cent of the increase in the population in 1991.

Financial flows to Pondicherry occur not only from adjoining states, but from different parts of the country in various forms for investments, services, etc. As mentioned, there are also flows from outside the country due to both remittances from NRIs and pensions paid by the French Government.

There is a wide spread perception that foreign remittances are leading to conspicuous consumption rather than investment in Pondicherry. The banks are flush with funds and deposits have risen more sharply than credit off-take. It must be presumed that bank deposits are financing investments outside the Union Territory, since there are no restrictions on the movement of funds by the banks to other states of the Indian Union.