Current State and Performance Review of SEZs in India: A Survey

The establishment of the India’s first Special Economic Zones (SEZ) unit and the consequent announcement of a comprehensive SEZs Act in February 2006, bestowed a number of benefits to SEZs in terms of fiscal incentives and state of art infrastructure. Since then SEZs have witnessed generation of employment, investments and exports over a period of time. The current survey has been undertaken to highlight the efficiency and issues of SEZs and their expectations with regard to the formulation and modification of policies. The survey reveals that while some progress has been made in the effective functioning of the SEZs, yet the expected benefits have not been reaped. High operational cost, fall in market demand, global slowdown, lack of skilled manpower are some reasons held accountable why SEZs in India have not taken off. Furthermore, it is found that operating in Domestic Tariff Area (DTA) has become more beneficial as compared to operating within SEZs especially after withdrawal of exemption for Minimum Alternate Tax (MAT) and Dividend Distribution Tax (DDT) for the SEZs. A robust policy design and efficient implementation can lead to the effective functioning of the SEZs which is an important mechanism for promoting trade and investment, along with generation of employment.

Keywords

Special Economic Zones (SEZs), Minimum Alternate Tax (MAT), Dividend Distribution Tax (DDT)

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