The SEZ problem

The department of industrial policy and promotion’s (DIPP) initiative to locate and map all industrial parks and special economic zones (SEZs) across the country—there are currently large gaps in this data—is doubtless well-intentioned. More data generally means more scope for effective policymaking. But the underlying issue when it comes to SEZs in India goes far beyond a lack of accurate data.

The SEZ policy was supposed to create pockets of industrial excellence and boost Indian exports over the years. Instead, the experiment has largely failed. There are a number of reasons for this such as policy mismatches which reduced the export competitiveness of SEZ-based companies. Another reason is the lack of infrastructure; land alone does not an SEZ make. But perhaps the biggest problem turned out to be the manner in which companies used the tax holiday SEZs afforded to indulge in land arbitrage, essentially turning SEZs into land-grab opportunities.

These are not problems more data can fix. A more fundamental rethink is needed.