Special Economic Zones in India: An Instrument for Economic Development

Abstract

The development of Special Economic Zones (SEZs) in India is one of the major steps for
economic growth taken by the government. The reason behind introduction of SEZs
was primarily to increase the pace of growth and development of our economy, equip
with latest infrastructural facilities and technology along with creation of employment
opportunities. It is an economic tool and instrument for the growth of exports, increase
the level of forex reserves and dazzle more and more Foreign Direct Investment (FDI)
into the Indian economy. It is very important on the behalf of policy makers to frame
policies in such a way that all the objectives of SEZs are effectively achieved. The
government has provided various incentives to the SEZs developers as well as to
businesses to be developed under SEZs in the form of single window clearance
mechanism to reduce the bureaucratic delays, various tax concessions, providing land
at the best possible cheaper rates, exemption from duty on import of materials, 100%
FDI via automatic route except for some items, exemption from Minimum Alternate Tax
(MAT), the advantages of external commercial borrowings up to a specified limit etc.
The main objective of the paper is to investigate whether the introduction and
execution of SEZ policies had any positive impact on the FDI inflows in Indian economy
and what India needs to improve to make out maximum from SEZs.