DR. B.R.
AMBEDKAR NATIONAL LAW UNIVERSITY,
SONEPAT
Assignment of Law on Infrastructure Development
Course Code: 1001A
Special Economic Zones (SEZs) in India – A Comprehensive
Analysis
SUBMITTED TO: SUBMITTED BY:
DR. MANISHA Suraj Shekhawat
ASSISTANT PROFESSOR Roll No.: 2001113
DBRANLU, SONEPAT B.A. LL.B. (Hons.)
SEMESTER: 10TH Batch: 2020-2025
i
Acknowledgement
The completion of this project would not have been possible without the
participation and assistance from the lectures.
The assignment is a result of the facts and knowledge gathered from the different
reading material collected from the reputed university’s library and other
available sources. I would like to thank Dr. Manisha for providing me the
opportunity to work on this assignment. The knowledge which I gathered from
class lectures was very helpful and acted as the ray of light in completing this
project.
Lastly, I would like to acknowledge all those who helped me throughout in
completing this assignment.
ii
Contents
1. Introduction ....................................................................................................................................... 1
2. Historical Background...................................................................................................................... 1
3. Objectives of SEZs in India .............................................................................................................. 2
4. Salient Features of the SEZ Act, 2005 ............................................................................................. 2
5. Types of SEZs in India ..................................................................................................................... 3
6. Administrative Structure ................................................................................................................. 3
7. Performance of SEZs in India.......................................................................................................... 3
8. Advantages of SEZs .......................................................................................................................... 4
9. Challenges Faced by SEZs ............................................................................................................... 4
10. Recent Policy Reforms and Future Outlook................................................................................. 5
11. State-wise Examples of Successful SEZs ....................................................................................... 6
12. Role of SEZs in India’s Economic Vision ..................................................................................... 6
13. Conclusion ....................................................................................................................................... 7
Bibliography / References: ................................................................................................................... 7
iii
1. Introduction
India, as an emerging economy, has constantly strived to develop strategies that boost
economic growth, generate employment, and attract foreign investment. One such strategy is
the establishment of Special Economic Zones (SEZs)—designated areas with special
economic regulations that differ from the rest of the country. These zones are instrumental in
promoting export-led growth by providing an internationally competitive environment to
businesses.
The concept of SEZs is not unique to India. Many countries, including China, South Korea,
and the UAE, have successfully implemented SEZs as a part of their economic development
plans. In India, the SEZ policy has evolved significantly since its inception and now plays a
pivotal role in the country’s trade and industrial strategy.
2. Historical Background
2.1 Pre-SEZ Era: Export Processing Zones (EPZs)
India first experimented with the concept of economic enclaves in 1965 by setting up the
Kandla Free Trade Zone in Gujarat, later termed as an Export Processing Zone (EPZ). The
objective was to overcome constraints faced by exporters such as poor infrastructure and
complex regulatory frameworks. Over time, EPZs were established in Mumbai (SEEPZ),
Chennai, Noida, and other cities.
However, the performance of EPZs remained unsatisfactory due to:
• Bureaucratic hurdles
• Inadequate autonomy
• Infrastructural deficits
• Limited incentives
2.2 The Shift to SEZs
To rectify these issues and provide a more comprehensive framework, the Special Economic
Zones Policy was announced in April 2000. This marked a paradigm shift in India’s approach
1
to trade promotion and economic development. The goal was to create a more business-friendly
environment with minimal regulations and attractive fiscal incentives.
The turning point came with the enactment of the Special Economic Zones Act, 2005, which
came into effect on February 10, 2006. This Act provided a clear legal framework for the
establishment, operation, and regulation of SEZs.
3. Objectives of SEZs in India
The primary objectives of SEZs are:
1. Enhancing Export Performance: Encouraging the production and export of goods
and services to increase foreign exchange earnings.
2. Attracting Foreign Direct Investment (FDI): Providing a liberal regulatory and tax
framework to attract both foreign and domestic investors.
3. Generating Employment: Creating job opportunities in manufacturing and service
sectors.
4. Infrastructure Development: Promoting world-class infrastructure including roads,
power, and communication facilities.
5. Balanced Regional Development: Encouraging industrial development in
underdeveloped regions.
6. Simplified Procedures: Streamlining administrative processes through single-window
clearances.
4. Salient Features of the SEZ Act, 2005
• Establishment: Both Central and State Governments can establish SEZs.
• Approval Process: Board of Approval (BoA) under the Ministry of Commerce handles
SEZ proposals.
• Types of SEZs: Multi-product and sector-specific SEZs.
• Developer and Units: Separate provisions for SEZ developers and units operating
within SEZs.
2
• Single Window Clearance: Centralized approval system for setting up units and
operational procedures.
• Tax Incentives:
o 100% income tax exemption for SEZ units for the first 5 years, 50% for the next
5 years.
o Exemption from customs duties, excise, and service tax.
o Relief from minimum alternate tax (MAT) (later reintroduced in 2011).
• External Commercial Borrowing (ECB): Easier access to foreign loans.
5. Types of SEZs in India
1. Multi-product SEZs: Cover large areas (1,000+ hectares) and allow various industries
to operate.
2. Sector-specific SEZs: Focused on one industry like IT, biotechnology, textiles, etc.
3. Free Trade and Warehousing Zones (FTWZs): Focus on storage and trading
activities.
4. Services SEZs: Particularly for IT/ITES and financial services.
6. Administrative Structure
The SEZ policy is governed by a three-tier administrative structure:
1. Board of Approval (BoA) – Apex body for SEZ approval and policy oversight.
2. Development Commissioner (DC) – Appointed for each SEZ to monitor and facilitate
operations.
3. Unit Approval Committee (UAC) – Handles approvals for units and daily
administrative functions.
7. Performance of SEZs in India
7.1 Growth in Numbers
As of 2024, India has:
3
• Over 370 SEZs notified.
• Around 260 operational SEZs.
• Leading SEZs include SEEPZ (Mumbai), Cochin SEZ, Noida SEZ, and
Visakhapatnam SEZ.
7.2 Export Contribution
• In FY 2022–23, SEZs contributed over ₹7.6 lakh crore to India’s total exports.
• IT/ITES SEZs continue to dominate, followed by pharmaceuticals, gems and
jewelry, and engineering goods.
7.3 Employment Generation
• SEZs have created over 2 million direct jobs and a higher number of indirect
employment opportunities.
7.4 FDI Inflow
• SEZs have attracted considerable FDI due to relaxed norms and regulatory benefits.
8. Advantages of SEZs
1. Increased Investment: Domestic and foreign investors are attracted by incentives and
infrastructure.
2. Efficient Infrastructure: Modern amenities promote industrial productivity.
3. Simplified Laws: Reduced red tape and faster clearances improve the ease of doing
business.
4. Export Promotion: Duty-free imports, tax breaks, and easier compliance boost
exports.
5. Employment Opportunities: Both skilled and unskilled employment sees a rise in
SEZs.
6. Technology Transfer: Encourages adoption of advanced technologies.
9. Challenges Faced by SEZs
9.1 Land Acquisition Issues
4
• Several SEZ projects have faced resistance due to forceful land acquisition.
• Displacement of local communities and inadequate compensation remain sensitive
issues.
9.2 Operational Inefficiencies
• Many SEZs remain underutilized or non-functional due to poor planning.
• Some developers misuse land without establishing productive units.
9.3 Regulatory Ambiguity
• Policy flip-flops and reintroduction of taxes like MAT and DDT created uncertainty for
investors.
9.4 Environmental Concerns
• Rapid industrialization in SEZs may lead to environmental degradation if not properly
monitored.
9.5 Regional Disparity
• Concentration of SEZs in specific states (e.g., Tamil Nadu, Maharashtra, Gujarat)
widens regional inequality.
10. Recent Policy Reforms and Future Outlook
10.1 DESH Bill
• The government plans to introduce the Development of Enterprise and Services
Hubs (DESH) Bill, which aims to:
o Replace the SEZ Act, 2005.
o Focus on domestic production as well as exports.
o Introduce flexible labor norms and greater state involvement.
o Enable “Enterprise Hubs” rather than just export zones.
10.2 Integration with Global Supply Chains
• The government aims to align SEZs with global value chains (GVCs) to attract high-
tech and service-oriented industries.
5
10.3 Digital Infrastructure
• Promoting IT-enabled SEZs and e-governance for ease of doing business.
10.4 Green SEZs
• Emphasis on sustainable SEZs with green building norms and eco-friendly operations.
11. State-wise Examples of Successful SEZs
11.1 Tamil Nadu
• Home to multiple IT SEZs in Chennai and Coimbatore.
• Electronics and automobile hubs also gaining momentum.
11.2 Gujarat
• Strong performance in multi-product SEZs like Mundra SEZ.
• Also hosts petrochemical and engineering industries.
11.3 Andhra Pradesh
• Visakhapatnam SEZ is a key player in pharmaceuticals and IT exports.
11.4 Karnataka
• Bengaluru hosts numerous IT/ITES SEZs including Infosys and Wipro campuses.
12. Role of SEZs in India’s Economic Vision
India aims to become a $5 trillion economy, and SEZs are expected to play a key role in this
transformation by:
• Strengthening the manufacturing base.
• Boosting service exports, especially IT and fintech.
• Driving innovation and technology upgradation.
• Ensuring inclusive regional development through smart zone distribution.
6
13. Conclusion
Special Economic Zones in India have undergone a significant transformation over the past
two decades. From modest beginnings with EPZs to becoming major hubs of industrial and
service activity, SEZs are integral to India's growth story. They have helped boost exports,
generate employment, and attract investment. However, challenges related to land acquisition,
policy instability, and environmental concerns must be effectively addressed to unlock their
full potential.
The future lies in reforming the SEZ policy with a focus on sustainability, inclusivity, and
global competitiveness. The proposed DESH Bill, coupled with robust digital infrastructure
and better coordination between the Centre and States, can usher in a new era of industrial
growth driven by dynamic SEZs.
Bibliography / References:
1. Ministry of Commerce & Industry, Government of India – https://sezindia.nic.in
2. Economic Survey 2023–24, Government of India
3. RBI Annual Reports and FDI statistics
4. SEZ Act, 2005
5. Research papers and journal articles on SEZ performance in India
