Special Economic Zones in India: A Review of Investment, Trade, Employment Generation and Impact Assessment

Abstract

A geographical region encompassing more liberal economic laws than a country’s typical economic laws can be referred to as a Special Economic Zone (SEZ). A policy of setting up of SEZ was introduced in India on April 1, 2000 with a view to providing a more competitive free trade environment for exports. During the period from November 1, 2000 to February 9, 2006, the SEZs in India operated under the provisions of the Foreign Trade Policy. In fact, India was the first Asian country to recognise the importance and effectiveness of Export Processing Zone (EPZ) and the first EPZ came into being in 1965 in Kandla, Gujarat. But, since then not much has been done to the strengthening of EPZs in India. In 2000, therefore, the government replaced the earlier regime of EPZ by a new scheme of SEZs, which encompassed a number of potential benefits that were missing in the earlier scheme. In May 2005, the SEZ Act was passed by the Parliament and SEZ Rules came into force from February 10, 2006, which not only simplified procedures but also extended single window clearance for matters relating to central as well as state governments. The SEZ Rules provide for different minimum land requirement for different class of SEZs. The promotion of SEZs is expected to tackle wide range of structural bottlenecks created by monetary, fiscal, taxation, trade, tariff and labour policies, apart from overcoming complex procedures and infrastructure deficiencies (Aggarwal, 2006). It has been argued that since development of infrastructure requires huge capital investment and as implementation of structural reforms is a time consuming process, the establishment of SEZs would be the only realistic strategy governing the process of industrialisation. Although SEZs offer numerous benefits, there are also various positive as well as negative features associated with the establishment of SEZs in India. It is, therefore, essential to analyse not only the potential benefits of SEZs but also the likely impact of establishment of SEZs on agricultural production, employment, water and food security. This paper is an attempt in this direction and it specifically focuses on benefits of establishing SEZs, their current status in terms of