In 2006 the Ministry of Panchayati Raj named Kalahandi one of the country's 250 most backward districts (out of a total of 640). It is one of the 19 districts in Odisha currently receiving funds from the Backward Regions Grant Fund Programme (BRGF).
Agriculture
Kalahandi is largely an agriculture based economy. During Bengal famine Kalahandi alone had sent 100,000 tons of rice. During 1930s princely state of Kalahandi had proposed to build upper Indravati project but subsequent merger of princely state with India delayed the project . It got approved in 1978 and yet to be fully completed. In the mean time drought occurred in 1960s and lately in 1980s. In 1980s Kalahandi become infamous for drought, child selling, malnutrition and starvation death and social worker referred it as 'Kalahandi Syndrome. Though KBK project was announced in 1990s by central
Kalahandi also is an example of disparity /contrasts that exist in many part of developing/underdeveloped world. On the one side, this district is famous for famine and starvation deaths: this is the same district that is rich with agriculture. Dharamgarh sub-division was historical known for rice production in Odisha. Since 2000s the Indravati Water Project, second biggest in the state has changed the landscape of southern Kalahandi, leading to two crops in a year. Because of this, blocks like Kalampur, Jaipatna, Dharamgarh, Jungarh, Bhawanipatna etc. are witnessing rapid agricultural growth. This has boasted the Highest Number of Rice Mills in Kalahandi among districts in Odisha. The number of rice mills in the district was around 150 in the year 2004-05. More than 70% have been built in the five years after commissioning of the Indravati project.
Forest resources
Forest based products like Mahua, Kendu leaf, wood, timber and bamboos are also
