ACF619 Introduction to Economic Zones

Introduction to Economic Zones

“Export else perish “these are the words of first Prime Minister of India Pt. Jawaharlal Nehru. India being a continent like country having 30 states, more than 1000 languages and world second largest man power having diversified natural conditions right from Rain Forests of Kerala, Ice Mountains of Himalaya, Runn of Kuch to productive land of Bramahaputra has great potentials of world class export worthy products from various industries like Agriculture, Engineering, Chemicals, Software’s, Gems and Jewelry, Pharmaceuticals, Bio technology and many more.

During last fifty years, mostly ours exports have been less than our imports and the balance of trade been unfavorable. In 1990-1991 India had faced real pressure on the balance of payment. During this period, exports had stagnated and there was a crisis in foreign reserves which lead to an emergency in India.

Liberalization policy was announced in June 1991. It is the precious gift of Dr Manmohan Singh to the people of India at a time when the country was in the grip of unprecedented economic crisis and political turmoil. One of the areas in which this policy focused on was on increasing India’s export. And the trickle down effect of these reforms has lead to the advent of SEZ

In this age of Globalization, there is a need for every nation in the world to perform well economically. With the improvements in science and technology and the raising standards of living worldwide, ensuring economic development assumes primary importance in the policies of every nation.

While striving for economic development, every nation takes steps necessary for the implementation of its ambitious plans. But more often than not, these plans cannot be affected successfully throughout the nation. There are always shortcomings in these economic plans. Every nation wants to give its industries ample facilities for efficient production of goods and services and in order to make them globally competitive in terms of price and quality. Some of these facilities can be used by all industries throughout the nation. However, sometimes, some facilities cannot be given because of reasons like the geographical extent and the possibility of misuse.

For Example: If a country wants to give subsidized power to a specific industry, it cannot do so throughout the nation as keeping a check on whether the subsidized power is going to the right people or not is a Herculean task.

Thus, in order to give the industry certain added advantages, the governments of various nations come up with special schemes and subsidies mostly related to customs duties. These schemes provide an upward thrust to the nation’s products in the global markets on account of lower prices / better quality. Such schemes, if implemented directly, are not allowed by the WTO. This has resulted in many nations coming up with such schemes in an indirect manner. One of the most popular ones is to set up a special area demarked for the purpose of industrial growth. Various facilities can be offered in this area without the fear of them being misused and also, no resistance from WTO (or any other trading partner / nation) is encountered on account of the scheme not being a national policy, but only limited to a small area demarked for the purpose. This is where the concept of ‘Economic Zones’ comes in.