The Hindu Business Line : Parody of a panacea

Some policymakers in the States and at the Centre seem to have taken the idea of economic reform so seriously as to almost make it a parody of itself. Suddenly, one idea that expresses zealous reforms for many in New Delhi and now in some States is the creation of privileged zones or regions. The Commerce Ministry set the ball rolling with the Special Economic Zones, followed it up with Agricultural Export Zones and now, at the Hannover Fair, there has been talk of special economic investment regions that seven States would like to create. So far it is not clear how different they would be from the Special Economic Zones except that the proposed "region" would be bigger than an SEZ; according to media reports, they would incorporate several SEZs. Particularly remarkable is that this notion of privileged zones comes as a response to what is a routine worry among foreign investors — poor infrastructure. The distressing part is that the panacea for such systemic and national ills seems to be the promise of zones of excellence; SEZs of 1,000 hectares, special investment regions of 200-250 sq km wherein world-class infrastructure would be created.

The policy response is shortsighted. It is disturbing if one looks at the implications of such zones should they be followed through in letter as in spirit. If resources have to be diverted to create world-class infrastructure and snappy communications in enclaves, the rest of the country is justified in asking if it does not also require world class roads and power, especially when it contributes the most to exports and GDP, poor infrastructure and all. The fact is that in their zeal to seek global justification for their ideas, the policymakers have missed the woods for the trees. Rotterdam or Houston are cited as models for the special investment regions in the seven States. The fact is that the models are located in countries that have excellent overall facilities.

This is not the case with the Indian counterparts. Karnataka and Maharashtra, two of the most industrialised States, have abysmal power problems; both Bangalore, the Silicon Valley of India, and Pune, the next IT hub, have extensive power-cuts daily. The less said about the roads in Mumbai the better. It may be more convincing to investors and beneficial to the economy if the current budgetary promises of good infrastructure are fulfilled with some commitment to goals. The spin-offs from such islands of privilege have been questionable; tax holidays and flexible labour laws are strong, and perhaps the only, motives for the popularity of such zones. What is earned in approvals will be more than lost in the revenue forsaken. Should the rest of the economy subsidise such an expensive proposition?

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