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A special economic zone (SEZ) is an area in which the business and trade laws are different from the rest of the country or the place. The SEZs are located within a country’s national borders. The main goal of SEZ is to have an increased trade balance, employment, increased investment, job creation, and effective administration. In order to encourage businesses to set up in the zone, financial policies were made and implemented. These kinds of policies typically focus on investing, taxation, trading, quotas, customs, and labour regulations.
In addition to this, companies may be offered tax holidays, where upon establishing themselves in a zone, they are granted a period of lower taxation. The benefits a company gains by being in a special economic zone may mean that it can produce and trade goods at a lower price, aimed at being globally competitive.
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Definition
- The special economic zone (SEZ) refers to the area in which the business and trade laws are different from the rest of the country or the place.
- The SEZs are located within a country’s national borders.
- The Special Economic Zone (SEZ) Policy was announced in April 2000.
- It resulted in the formation of a much larger and more efficient form of their predecessors with a world-class infrastructural facility.
- The SEZ Act, 2005 and SEZ Rules became effective on and from 10th February 2006.
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History
- The Indian Special Economic Zone was formed with the establishment of the first Export Processing Zone (EPZ) at Kandla in the year 1965.
- The Special Economic Zone came into existence because the economic reforms incorporated in the early 1990s did not promise the overall growth of the Indian economy.
- The economic reforms incorporated during the 1990s did not produce the expected results.
- The Indian manufacturing sector witnessed a sudden drop in the overall growth of the industry, during the second half of the 1990s.
- The History of SEZs in India suggests that red tape, lengthy administrative procedures, rigid labour laws and poor physical infrastructural facilities were the main factors of deterioration of Foreign Direct Investments(FDI) inflow into India.
- The Indian markets were not resilient enough to facilitate easy entry of Foreign Institutional Investors (FIIs) into the Indian economic system.
- The legal framework of the Indian economy was notwithstanding enough to prevent the misuse of Indian markets by foreign investors.
- The lack of an investor-friendly environment in India prevented the growth of Indian industry, in spite of the implementation of liberal economic policy by the central government.
- Finally, it resulted in the formation of a much larger and more efficient form of their predecessors with a world-class infrastructural facility.
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