Kandhamal is one of the most backward districts of Odisha with 47.2 percent of households in BPL category as recorded in the year 2000 (District Annual Plan Document, 2013-14, Kandhamal). The district has an agriculture-based economy and agriculture, horticulture, animal husbandry, forest produce trading, and tourism are the mainstays of the economy. It has the lowest population density and is dominated by tribal populations. The district is major producer of ginger, turmeric and has created a name for itself in India for spice cultivation. It contributes to the state economy through the production of cups and plates stitched out of Sal leaves besides other Non-timber forest products (NTFP) products.

The Real Per Capita Net District Domestic Product (NDDP) in Kandhamal in 2004-05 price estimated to be Rs. 40, 729/- (Odisha: Rs. 23, 968/-). District share to the Gross State Domestic Product (GSDP) at 2004- 05 price for 2010-11 is 2.56 percent which is higher to 12 districts and lower than 17 districts in the state. Contribution of agriculture and allied sector towards Gross and Net District Domestic Products (GDDP) remain high in the district followed by the service sector and banking, real estate, and construction. The contribution of trade to GDDP remain low.

The district economy is dominated by agriculture and allied sectors including horticulture, animal husbandry, fisheries, and forestry. Land is an important asset and land-based activities are key livelihood activities. According to the Forest Survey of India Report, 2011, 68.18 percent of the district geographical area is under forest cover. Minor forest products, viz., Tamarind, Hill brooms, Fibres, Oilseeds, Kendu leaves, Medicinal plants, Fruits, Roots, Gums, Tuber, Flowers, Jhuna, etc. are plenty available in the district due to large forest base. The district topography makes 70 percent of the land unproductive agriculturally. The district climate is suitable for horticulture and it is known for turmeric, ginger and honey (forest-based and cultured in some places). By 2011-12, the district was having 116 MSME units with a total investment of Rs.2.88 crores. It is found that Agriculture, horticulture, tourism, forestry and micro-enterprises are the major sectors that are going to be the growth drivers for the district.