In 1965, India set up Asia’s first ever export processing zone in Kandla, Gujarat. In 1980, China took the same idea and set up its first special economic zone (SEZ) in Shenzhen. Today, China is the world’s factory, while India struggles to launch its industrial revolution.
Shenzhen’s 30 years, which it celebrated on Monday, are a testament to the idea of clusters. It’s a simple idea: A large area, concentrating on similar manufacturing activities and benefiting from relaxed rules, can create great scale and efficiency.
But only China so far seems to have executed it to reap gains. India, despite its SEZ legislation in 2005, hasn’t. One problem: India hasn’t leveraged the fundamental quality of an SEZ, its size.
Though it has hundreds of other investment zones, China has only five SEZs. But they’re large: Shenzhen itself covers 2,000 sq. km. India boasts 577 approved SEZs, with 114 of them operational. But around 90% of them cover less than 3 sq. km each.