Tourism is the mainstay of the town's economy. Since the late 1990s the town and municipality have seen development of industrial sites. Rashtriya Chemicals and Fertilizers (RCF) was the first industrial unit set up near Alibag. Other companies include Ispat industries Ltd (Mittal Group), Welspun Maxsteel Ltd (Welspun Group), Gas Authority Of India Limited (GAIL), HP LPG and Reliance Petrochemicals (RPCL) are also located near the town
