Special Economic Zones: Are they a boon or a bane.
Replicating the success of China, the economic model of Special Economic Zones (SEZs) was introduced in India in the year 2000. The idea was to use this concept as a pull force for large-scale investments and promote exports. By incentivizing the process, large scale infrastructure was to be established as a proper foreign territory.
Various benefits regarding taxes and duties along with world-class infrastructure were the main attractions. It was projected that these SEZs would have large-scale manufacturing units along with storage facilities and operational efficiencies. The vicinity of vendors and various service providers was an added advantage. These SEZ were to be established in the backward areas of the country to ensure the area’s development and growth in employment.
However, over the years the concept of Special Economic Zones seemed to have weakened in India. The effect of Indianization of SEZ concept made it deviate from the one in China. Here it gave emergence to several small sized SEZs that too in the IT/ITeS sector. Further, the concept was to ensure inclusive growth. However, the presence of operational SEZs concentrated in just a few states across the nation, defeats one of the primary objectives.
Of the latest data available till 2014, only 194 SEZs are operational out of the approved 564. A CAG (Comptroller and Auditor General of India) report further indicates that 57% of SEZs are in IT & ITES sector and only 9.7% are in manufacturing. The employment generation has also been specific favoring professionally qualified and abysmal. If there had been more SEZs focusing on manufacturing, then the employment scenario could have been all-encompassing covering all levels of skill sets.
The data is sufficient to prove that to a significant extent the implementation has failed the aim with which these were started.
The Chinese started SEZs with the goal of becoming a manufacturing and export-driven economy. As can be seen, SEZs have played a pivotal role in their case. India’s deviation has proved costly requiring a broad revamp. The non-existence of single window system, lack of connectivity, incentive schemes, and taxes – the lists of remedial measures is long.
If we look at the yearly exports figures of our economy, the manufacturing sector dominates however in the case of SEZs; this sector has a dismal performance. There is an urgency to look into this matter and propose a resolution through a variety of policy measures.
Another in-depth analysis with the more recent data available of these Special Economic Zones in India might suggest an increase in the participation of the manufacturing. However, it is a shift of already established export-oriented units into the SEZs. These units include light and heavy engineering industries, auto and related industries. While this might make the performance of these economic zones look improved but that is not the case.
The ‘Make in India’ mission of the Central Government can only be successful when issues relating to SEZs are streamlined.