SEZs, Exports and India's External Competitiveness

Paper Summary:

This paper takes an in-depth look at how India is fast emerging as an important destination for FDI (foreign direct investment) inflows, especially in the developing world. India's rank in the inward FDI Performance Index as well as the Inward FDI Potential Index shows some improvements in the first few years of this century. This paper explores some of the major policy issues involved and which require urgent attention.
Includes graphs and tables.

From the Paper:

"India over the years has progressively opened up its economy to effectively face the new challenges and opportunities of the 21st. Century. To compete in the international markets, the Government of India (GoI) has liberalized export and import policies & licensing of technologies. It has also implemented tax reforms providing various incentives. Special Economic Zones (SEZ) policy is one of the steps India has taken to boost economic growth through forward-looking approach. SEZ is a specifically duty free enclave and is deemed to be a foreign territory for the purpose of trade operations and duties and tariffs. India has been the oldest country to introduce the concept of Export Promotion Zone (EPZ) but later on the concept was enlarged in scope with liberalization and all the EPZs were converted into SEZs with more number and volume of concessions in tariffs and duties, approvals and other non-financial concessions. The SEZ bill was passed by the parliament in 2005 and the Commerce Ministry notified the SEZ law on February 9, 2006 and the rules came into effect from February 10, 2006. The policy provides for setting up of SEZs in the public, private, joint sector and by State Governments. In addition, the GOI has decided that Offshore Banking Units will be permitted to be set up in Special Economic Zones. These banks would be virtually foreign branches of the banks but located in India. These OBUs would be exempted from CRR, SLR and would give access to SEZ units and SEZ developers finance at international rates."

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