Yanam's economy is a blend of traditional agricultural practices and modern industrial enterprises. For many decades, the region relied primarily on farming and fishing. However, in the late 20th century, the Puducherry government introduced tax holidays and industrial subsidies to spur economic growth. This led to a boom in mid-scale manufacturing and industrial setup in the 1990s and 2000s.
While the expiration of certain tax benefits and intermittent labor disputes have altered the industrial landscape in recent years, manufacturing remains a cornerstone of the local economy. The cost of living in Yanam is generally moderate, comparable to nearby tier-3 cities in Andhra Pradesh, but benefits from the heavily subsidized public distribution systems funded by the Union Territory government.