The liquidity crisis and associated recession currently gripping the global economy have far reaching consequences for the economies of all developing countries, in particular those with a higher degree of integration with the global economy. India is not an exception to this general trend. Kerala, being historically more integrated with the rest of the world, is more susceptible to any external shocks compared to rest of the states in India. This preliminary report has been prepared with a view to assist the state government in understanding the implications of the crisis, so that appropriate policies and programmes could be chalked to deal with any adverse situations that may arise.