Lakshadweep's economy is primarily dependent on agriculture, fishing, and tourism. Coconut cultivation is a major agricultural activity, with copra being the primary cash crop. Fishing, both traditional and commercial, contributes significantly to the local economy, with the export of tuna fish being a notable activity. The tourism sector is gaining prominence, attracting visitors with its pristine beaches, coral reefs, and water sports. The government is making efforts to promote eco-tourism and sustainable development in the region.

Lakshadweep is governed by an Administrator appointed by the President of India. The Administrator acts as the head of the union territory and is responsible for the overall administration, policymaking, and implementation of central government schemes. The Administrator is assisted by an Executive Council comprising officials responsible for various departments. The local administration is decentralized, with villages having elected panchayats that play a role in local governance and decision-making.

The central government plays a vital role in the development and governance of Lakshadweep, providing financial assistance, infrastructure development, and social welfare schemes. The administration focuses on preserving the unique cultural heritage, promoting sustainable development, and ensuring the welfare of the local population.