Abstract:
India has experimented with enclave-based growth through export zones at least since
1964. These zones were developed as regions with limited regulation to encourage export
growth, which would earn the much-needed foreign exchange to industrialize the
economy. In 2000, a new Special Economic Zone (SEZ) policy was formulated and it
became the Special Economic Zone (SEZ) Act in 2005. The SEZ Act has attracted a lot
of entrepreneurial attention due to the tax incentives offered, and social attention because
of the controversial nature of land acquisition for these projects.
This doctoral research focuses on the economic incentives created by export zone policies
and rules in India. The three research questions this dissertation attempts to answer are
the following: Have export zones caused export growth in India? What is the
fundamental reason for the lack-lustre performance of Indian zones? What are the
primary objectives of the new Special Economic Zone policy and are they being
achieved? The first chapter analyzes the effectiveness of zone policies towards promoting
exports, using data on exports, both from the zones and outside, and concludes that
general trade-reforms rather than zone policies have lead export growth in India. The
second chapter analyses the knowledge problem with developing export zones in India
and concludes that one of the primary reasons export zones in India failed to perform
better was the knowledge problem, inherent in centrally planned economies, that
prevented better location of these zones and their success. The third chapter looks at the
political economy of developing big area private enclaves, and argues that private sector
development of big zones is not possible with existing land acquisition policies in India.
