Tuesday, June 14, 2011

OECD Praises India’s Economic Zone Policy

India's Special Economic Zones—swathes of land slated for industrialization that receive tax holidays and other benefits—have often come in for flak domestically. They have sparked concerns over the land acquisition process as well as suspicion that in some cases the policy has been a clever way for real estate developers to snag land.

Raveendran/Agence France-Presse/Getty Images
Farmers protested in 2007 against government acquisition of farm land in Nandigram in West Bengal state for a planned SEZ.

But in its new survey of India's economy, the Paris-based Organization for Economic Cooperation and Development viewed the zones favorably.

"The recent strong growth in exports, employment and investment in the SEZs could act as a catalyst for broader change," said the report. "Even though they are a second-best policy option, compared to more thorough economy-wide structural reforms, SEZs are providing an important and expanding platform for industrial development."

India put in place rules to allow these zones to be set up five years ago, modeling them on China's special economic regions that helped turn that country into an export giant. There are special procedures to simplify setting up such a zone, as well as a slew of tax benefits. (India's proposed new tax code, which is still in the draft stage, could end many of these tax benefits for SEZs approved after 2014.)

According to the OECD report, released Tuesday, India had granted approval to set up 571 SEZs b [...]



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