Special Economic Zone in India:

Public Purpose and Private Property

GROUP 8
 INTRODUCTION

Special Economic Zone (SEZ) is a specifically delineated duty-free enclave and shall be
deemed to be foreign territory for the purposes of trade operations and duties and tariffs.
Goal is to increase foreign investments.
SEZs have been established in several countries, including China, India, Jordan, Poland,
Kazakhstan, Philippines and Russia.
Any private/public/joint sector or state government or its agencies can set up an SEZ
They are growth engines that can boost manufacturing, augment exports and generate
employment.
A special geographical region which has different laws when compared to other regions.
SEZs are projected as duty free area for the purpose of trade, operations, duty and tariffs.
Indian Economic Reforms

Indian economy functioned under License Raj

Business needed to be heavily regulated
FERA limited Foreign investment to 40%
High tax rates
Permission for laying off employee and capacity expansion
Highly Bureaucratic and corrupt
 License
Raj

Unskilled High
Labors Regulation

Problems

High Tax
Corruption
Rates

Rigid
Labor
Laws
Liberalization

Balance of payment crisis

Huge budget deficit and high inflation
Industrial licensing was eliminated
Many sectors opened for private participation
Aftermath of Liberalization

Investment increased from 24% to 37% of GDP

GDP was growing at 9%
Portion of population below poverty line declined to 27.5% from 36%
FDI inflow of $ 65 billion from 2000 to 2008
Software industry witnessed growth of 50%
Tata steel acquired Corus in 2007
Tata motors acquired Jaguar and Land Rover
Criticism of Liberalization

Doubts on sustainability of growth

Focused only on trade and industrial reform
Low capital investment in agriculture sector
Low ease of doing ranking,134
Special Economic Zones in India

India set up its EPZ in India in 1965 in Kandla, followed by one in Mumbai in
1972.
The governments objective in setting up SEZs in India were Multifold.
With 45.5% of Indias land area uncultivable, Government viewed the SEZ
scheme as a way to use such land optimally.
SEZs were permitted either to house multiple industries or to specialize in a
particular Industry.
Specialize SEZs catered to sectors such as information technology, gems
and jewelry, and biotechnology
 No of SEZs

IT/ELECTRONIC HARDWARE/SEMICONDUCTORS TEXTILES

PHARAMA /CHEMICALS MULTIPRODUCTS
BIO TECH ENGINERING
MULTI SERVICES FOOD PROCESSING
STEEL INDUSTRY GEMS AND JWELERY
FOOTWEAR AND LEATHER INDUTRY ENERGY RELATED
AUTO RELATED
Salient features of the SEZ Act of 2005

Under this Act, SEZs in India were granted the power by the central
government to operate as islands of Economic Activity within the Nation.
Firms under SEZs doesnt have to pay Import duties on raw material and
other inputs to production.
Completely exempt from Income tax on all export income for the first 5
years and were allowed a 50% exemption for the next 10 years.
Single window Clearance for necessary approvals.
Indian banks were allowed to set up offshore units in SEZs to access
International financial markets.
Most Indian labor laws applied within SEZs.
Setting up an SEZ

SEZs could be set up by the central or state government, the private

sector, or a PPP.
Multi-stage Process for setting up an SEZ.
SEZ Export Promotion council.
IDENTIFICATION FORMAL
OF AN AREA AND APPROVAL AND
APPROVAL FROM SELF
CENTRAL DECLERATION
GOVERNMENT FOR DEVELOPERS

PHYSICAL INSPECTION OF
LAND AND PAPERWORKS
BY MINISTRY OF
COMMERCE
Mahindra World City

Indias first operational SEZ.

Mahindra planned to retain only 30% of the land.
Problems faced were distance fro Chennai, Labor law paperwork and
Custom delays.
Factors contributing towards success were Land Acquisition plan by
Mahindra and Long term view on SEZ.
Tax benefits attracting FDI e.g. Nestronics Pvt Ltd.
Ministry of Commerce swift response to problems e.g Nestronics concerns
at Open House forum.
Aftermath of Nandigram

High court directed government to pay compensation to victims

Violence broke out between residents and CPM representative
Resident voted against the CPM government
Ratan Tata announced that Tata Motor was halting its project
Thank You