News: ‘India still far away from 'real' SEZs’

(BL 22/06/2006) New Delhi - The two mega special economic zones being set up by Reliance Industries and a big rush to build other such projects has opened a new chapter in India's economy, but there is still a long road ahead when it comes to 'real' large SEZs, economists feel.

Ever since the new SEZ policy was approved in February this year, the Government has already received above 100 applications to set up SEZs, but no serious efforts are being made so far to build 'real' large SEZs and the policy needs to be reworked to achieve this target, global investment banking major Morgan Stanley said.

One of the key purposes of SEZs is to build scale-related advantages, but most of the proposed SEZs are minuscule in size, said Morgan Stanley's India-based senior economists Chetan Ahya and Mihir Sheth in a latest India-focused report of the US-based firm.

The report said many of these proposed investments could be mere substitution of investments that would have otherwise taken place outside the SEZ area and the new SEZ investments are unlikely to provide the much-needed boost to the Indian small and medium sector competitiveness.

Indicating that the current policies do not adequately promote large SEZs, the economists said small SEZs appear to have lost their relevance with the rapid globalisation of the manufacturing scale.

The existing policy allows the minimum area for the SEZ area to be 1,000 hectares for multi-product zones, 100 hectares for product specific zones and just 10 hectares for IT, gems and jewellery and biotechnology zones.