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India needs to follow China’s example and focus on developing about 50 large special economic zones (SEZs) or smaller single-sector zones close to each other near ports and economic corridors to turn around the limited success SEZs have had in the country, a government sponsored study has proposed.
“The success story of countries such as China shows that their policymakers concentrated on a few good quality SEZs, which helped to boost exports. In India, there has been a rush towards creating several small SEZs without looking at location and connectivity factors which has led to the underperformance of the zones,” the report, brought out by research-body ICRIER pointed out. The Commerce Ministry commissioned the report to find out why SEZs had failed to deliver as per expectations since the policy was rolled out 10 years ago and the steps that need to be taken to turn them into engines of growth.
As per the report, the development of SEZs along economic corridors and smart cities would not only help the zones to access the logistics and social infrastructure, but would also enable them to have linkages with other industrial clusters. Larger SEZs could help the zones reap economies of scale.
The attractiveness of the SEZ policy will also depend on its ability to provide a conducive business environment and incentives, which is better from the businesses enjoyed elsewhere, including other clusters in the country and in competing countries, the report added.
“SEZs have contributed hugely in driving manufacturing and increasing exports in countries such as China, Taiwan and South Korea. There is no reason why they should not deliver in India if the policy focus is right,” an official from the Commerce Ministry told BusinessLine . The essential steps, according to the report, that the government needs to take to make SEZs deliver include strengthening the regulatory and administrative mechanism, addressing land-related issues, providing meaningful incentives to SEZs, promoting backward and forward linkages and proactive marketing for SEZs in India. In India there are 202 notified SEZs while the number of formally approved SEZs (projects with land in possession) declined from 564 (in 2014) to 437 a year later.
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