Diu's economy is distinctively small-scale, heavily reliant on the tertiary sector—specifically tourism and hospitality. The island's scenic beauty, historical monuments, and tax-free liquor status draw hundreds of thousands of domestic tourists annually, creating a robust local market for hotels, restaurants, and transport services.
Historically, fishing has been the backbone of the local economy, and it remains a vital livelihood for many families today. The cost of living in Diu is relatively moderate compared to major Indian metropolitan areas, though real estate prices in prime coastal areas have surged due to demand for hospitality infrastructure. The local administration is increasingly focusing on sustainable and eco-friendly economic development to protect the island's delicate coastal ecosystem.