SPECIAL ECONOMIC

ZONES IN INDIA

WHAT IS A SEZ ?
Special Economic Zone (SEZ) is defined as "a
specifically delineated duty free enclave and shall be
deemed to be foreign territory for the purposes of
trade operations and duties and tariffs".
The SEZs are expected to be engines for economic
growth.
economic and industrial development.
new employment opportunities.

SEZ: A BRIEF REVIEW

It covers a broad range of more specific zones
including :

Free Trade Zones (FTZ)

Export Processing Zones (EPZ)
Free Zones (FZ)
Industrial Estates (IE)
Free Ports (FP)
Urban Enterprise Zones and others

History of Free Trade Zones

First Free Trade Zone in the world had started on 1st
January 1965 at Kandla Port , Kutch, India.
By 1978 India had another four free trade zones at
Mumbai , Chennai , Noida and Falta.
In 1978 China had gone through major economic
make over and they had realized power in concept of
Free Trade Zones.

Cont..
First Chinese Free Trade Zone became operational in
1984 Shenzhen
In year 2000 one zone of Shenzhen was Exporting
thrice of India.
As on today there are about 2000 operation free
trade zones spread over 150 countries in world

Kinds of SEZ

Fundamentals of SEZs
SEZs (special economic zones) are fundamentally
different from the traditional free zones.
They are much larger in size; offer broader range of
activities such as
a single-window management,
streamlined procedures,
duty-free privileges,
also access to the domestic market on a dutypaid basis.

Cont..
Whether the enclave is termed an EPZ, FTZ or SEZ,
the cardinal factors are
appropriate infrastructure and transport facilities,
low factor cost,
flexible labour laws,
convertibility of currency,
stable legal and administrative regime, and
a commitment to the canons of an open economy

OBJECTIVES OF SEZ ACT

Generation of additional economic activity
Promotion of exports of goods and services
Promotion of investment from domestic and
foreign sources
Creation of employment opportunities

Development of infrastructure facilities

ROLE OF SEZ IN INDIAN ECONOMY

To provide
environment

internationally

competitive

To encourage FDI and enhance GDP

To increase share in global exports

SALIENT FEATURES OF SEZ

Self certification for export and import
Import and export movements of goods are based
on self declaration
No routine examination is made unless specific order
from Development Commissioner or authority.
Sub contracting

A SEZ unit may sub contract a part of its product or

production process to different units, even in abroad.

 Fiscal incentives-Tax
Exemption from excise

and customs duty on

procurement of capital assets, consumable stores, rawmaterials from domestic market

Exemption from sales tax, import duty, Income tax,
minimum alternative tax and dividend distribution tax
Single Window Clearance
Submit regularity documents at single locations
Less proceedings and save time

DISADVANTAGES OF SEZ
Land acquisition at very low prices
Farmers loose their livelihood
Tax holidays affect GDP

Benefits & Incentives for SEZ Units

Benefits & Incentives for SEZ Units

SWOT ANALYSIS OF INDIAN SEZ

STRENGTH
Based on Western model or SEZ in China
An established legal redress system
Relatively low labour costs
Employment opportunities
Indias large English speaking and skilled workforce
Exposure to technology and global market

 Worldwide acceptance of capabilities in fields

like

Pharmaceutical manufacturing & research

Clinical trials
Manufacturing auto parts
Engineering designing & consultancy, IT & ITES
Malls and hotels
Hospital

Financial & other institutional Networks like

Insurance Companies

 WEAKNESS
Poor infrastructure and transport facilities

High cost of capital

Inadequate institutional support

Political changes
Inappropriate locations

 OPPORTUNITIES
An alternative manufacturing base, particularly
compared to Chinese SEZs
Investments in core strength areas like IT and
software products and services.
New small ports & airports are also being developed
keeping SEZ concept in mind
A large NRI base who have traditionally invested less
in Greenfield development in India

 THREATS
The pattern of buying & selling may not continue.
With relocations of industries in other third world
countries, new competitors will emerge
opposing interests

Prospect of even more restrictive labour laws being

introduced
Increasing rejection rate for proposals to establish
SEZs

REASONS FOR FAILURE

SEZs in India
(ii)
(iii)
(iv)
(v)
(vi)

Inadequate infrastructure
Restrictive policies
Lengthy procedures No Single Window
Locational disadvantages
Stringent labour laws

In the 1990s, as a part of reforms, powers delegated to

zone authorities, additional fiscal incentives were given,
policy provisions were simplified and greater facilities were
provided leading to some, not very significant,
improvements.