12/06/2020 - Indian Economy

IAS Parliament 4 years

KEY POINTS

· The government claims that as of the end of last year, a total of 240 SEZs were operational with a total investment of over Rs 5.37 trillion. Over 2 million additional people have found employment in these SEZs, official statistics claim.

· The agitations over land acquisition and the controversies over adequate compensation to farmers whose land was acquired have meant SEZs have acquired a reputation for political notoriety in inverse proportion to the much-touted “spillover” effects that were the reason for the SEZ policy in the first place.

· One of the biggest criticisms of SEZ policy that they were little more than real estate plays intended to benefit politicians and local developers, rather than being used for wider developmental goals.

· The rent-seeking meant that site selections of SEZs were often controlled or heavily influenced by state governments, which meant that these investments were poorly matched for market conditions, and poorly suited for private or public investment in developmental infrastructure.

Measures to boost SEZ

· Need for a massive infrastructure boost and public works programme to revive the economy post-Covid. Such activity in quickly building these CEZs three on the east coast and three on the west with the associated internal and external infrastructure would fit well within such a programme.

· The reason for revisiting a coastal CEZs programme is that in the post-Covid world, global manufacturing companies are looking to derisk their supply chains by moving factories outside of China. CEZs would be a credible pitch for some of that manufacturing to move to India. The pitch should include the elimination of bureaucratic and regulatory hassles within such zones.

· To use CEZs as the springboard to launch a new generation of labour-intensive exports. This is all the more important now considering the unemployment levels.

· The key benefit is the kind of firms that would be attracted to such SEZs — large-scale companies, with high ability to employ large numbers of workers and with high capability for technology transfer. These CEZs would act as beacons of infrastructure and regulatory improvements, providing a huge demonstration effect for the art of the possible.