Effectiveness of the Special Economic Zone policy over the Export Processing Zone structure in India: trade performance at the aggregate level
Empirical evidence on the effectiveness of recent India's Special Economic Zone (SEZ) policy over Export Processing Zone structure is analysed in this article by aggregating data of seven conventional SEZs from 1986–1987 to 2007–2008. The study reveals that introduction of SEZs in place of its predecessor, the Export Processing Zone, is having a significant and positive impact on its trade performance at the aggregate level. However, in terms of contribution to national trade, the Indian SEZs are lagging way behind the expectations of policymakers. Furthermore, the SEZ policy does not seem to be successful in diversifying the exports basket, which in turn has affected the direction of exports by the SEZs. Moreover, these zones were found to be highly susceptible to external shocks. Thus, we strongly argue in favour of a care in deciding the sectoral choice of SEZs and careful scrutiny of its approval across major Indian states.
Location of SEZs and Policy Benefits What Does the Data Say
This paper undertakes a more in-depth investigation into the location of SEZs, based on data available from the Ministry of Commerce. It builds upon early work in Mukhopadhyay (2008) which noted that not only are SEZs located mostly in a few states, even within these states, they are concentrated in a few districts, most of which had an above average rate of industrialisation.
Effectiveness OF SEZs Over EPZs Structure: The Performance at Aggregate Level
Empirical evidence on the effectiveness of SEZs policy over EPZs structure is analysed in this paper by aggregating data of seven conventional SEZs from 1986-87 to 2007-08. The study reveals that the introduction of SEZs in place of its predecessor, the EPZs, is having a significant and positive impact on its performance at the aggregate level. However, in terms of contribution to national trade, the Indian SEZs are lagging way beyond the expectations of policymakers. Further, the SEZ policy does not seem to be successful in diversifying exports basket, which in turn has affected the direction of exports by SEZs. Moreover, these zones were found to be highly susceptible to external shocks. Thus, we strongly argue in favour of a care in deciding the sectoral choice of SEZs and careful scrutiny of its approval across major Indian States.