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Special Economic Zones In Indias Economic Growth Economics Essay

The rapid expansion of SEZs in India has initiated a wide-spread debate on the impact of such zones on the economic growth and development of the concerned nations. The most common expostulation in favour of SEZs is that it fosters quick economic growth. The key indicators which are used to determine this growth include increasing flow of FDI, growth in export-oriented production, and growth in GDP. Moreover, foreign investments in SEZs depend largely on global market demands and the world economy which is quite volatile; and increasing global competition combined with volatile markets makes SEZs unsustainable. This paper aims to highlight the impact of SEZs and their impact on economic growth of India. The main argument of this paper is that economic growth, as demonstrated in rising Gross Domestic Product, is not necessarily the same as economic development nor does it always mean an improvement in the well-being of the majority of the people in a country.
SEZ is a double edged weapon which has been gifted by WTO arrangements. It has been envisaged to play a very positive role in boosting manufacture of goods and rendering of services. It is allowed to impart/procure from the Domestic Tariff Area (DTA) without payment of duty all types of goods (except prohibited items, whether new or second hand. Goods shall include raw materials for making capital goods for use within the unit. The units are allowed to import goods required for the approved activity, free of cost on loan from clients. Software Gem and Jewellery Units may also avail this concessional opportunity through nominated agencies. Thus SEZ shall be a good foreign exchange earner.
Net Foreign Exchange Earning (NFE) shall be calculated cumulatively for a period of five years from the period of commercial production. In a country like India destined to have successive coalition governments utmost care is required in selection of land. Permission of setting up SEZ should be given on barren land. Other logistic support can be developed there like water, road, electricity, communication etc. In no case fertile land providing livelihood to inhabitants engaged in agricultural production should be given to launch industrial production.
Uprooted people deprived of their earnings from cultivation will be compelled to agitate. Political parties make it a slogan and instigate mass upsurge. We have seen how very recently TATA’s had to say good bye from Singur one pretext or other. Similar voices of protects have emerged from U.P. and Haryana. Hence it is suggested that utmost care is required while choosing a site for SEZ. Arbitrary selection of land is bound to boomerang in the form of retaliatory measures like picketing, Dharna, Satyagraha, Roadjam even violence.
Special Economic Zones – Indian perspective An SEZ is a trade capacity development tool, with the goal to promote rapid economic growth by using tax and business incentives to attract foreign investment and technology. Today, there are approximately 3,000 SEZs operating in 120 countries, which account for over US$ 600 billion in exports and about 50 million jobs. By offering privileged terms, SEZs attract investment and foreign exchange, spur employment and boost the development of improved technologies and infrastructure. There are 13 functional SEZs and about 61 SEZs, which have been approved and are under the process of establishment in India. Most of the developing countries such as India have recognized the importance of facilitating international trade for the sustained growth of the economy and increased contribution to the GDP of the nation.
Under this policy, one of the main features is that the designated duty free enclave to be treated as foreign territory only for trade operations and duties and tariffs. No license required for import. The manufacturing, trading or service activities are allowed. To provide a stable economic environment for the promotion of Export-import of goods in a quick, efficient and hassle-free manner, Government of India enacted the SEZ Act, which received the assent of the President of India on June 23, 2005.
The SEZ policy was first introduced in India in April 2000, as a part of the Export-Import (“EXIM”) policy of India. Considering the need to enhance foreign investment and promote exports from the country and realizing the need that level playing field must be made available to the domestic enterprises and manufacturers to be competitive globally, the Government of India in April 2000 announced the introduction of Special Economic Zones policy in the country deemed to be foreign territory for the purposes of trade operations, duties and tariffs.
Figure.1: State Wise investment in SEZs under notified area of SEZ Act, 2005 Source: Export Promotion Council for EOUs

Effects of the financial crisis on various UK industries

Economic Report The above graph shows the FTSE 100 index in the 5 years to the 14th October 2010. The index value at any particular time is based on the share prices of the top one hundred by value with each organisation being ‘weighted in proportion to its total market value’ (Pike, Neale, p.38 2009). Despite this index only being a small percentage of the total companies in the United Kingdom it generally reflects the performance of much of the market.
Prior to the financial crisis of 2008 leading to the crash in the markets-shown in the first quarter of 2009-investment in government debt was regarded as relatively risk free. It is a sign of the fragile economy situation globally that investors no longer view such investments as a ‘sure thing’ (Oakley, 2010). This credit crisis has prompted investors to proceed with caution and despite initial positive trends the principles which underpinned investments in the past have been shattered resulting in large scale political reforms throughout much of the Western World (Future of investing, FT). The suggestion of an unsteady recovery is reinforced by a recent article in the Economist which states that,
‘Big asset busts are usually followed by years of weakness as the over-borrowed repair their balance-sheets. Experience suggests that several years of slow growth lie ahead.’
Oct. 7th 2010
It goes on to state that the reactive measures will be ‘the biggest synchronised fiscal tightening on record’. Governments worldwide have had their hand forced in to budget cuts and other measures to sustain growth out of the crisis. Whilst this statement points to and assures uncertainty should be highlighted that ‘growth’ albeit at a slow pace is thought to be likely.
The current economic situation, specifically in the United Kingdom, is underlined by the massive growth in unemployment. Gilmore comments that the number of workless households has increased to 3.9 million over the last two years – an increase of 389,000 (2010, p 39). Furthermore, high profile cutbacks remain prevalent with Boots and Hewlett-Packard announcing combined cuts of 2,200 workers in the UK alone (Clark, 2010; Felsted 2010). Whilst over the past two years there has been an overall escalation in unemployment there are some signs of improvement. The three months to July 2010 witnessed the number out of employment fall to 2.47 million (Gilmore, 2010).
It can be said that the current times are very uncertain and on that account the correct investment strategy will be vaguer than ever before. For that reason, the general investment strategy which will be employed is ‘buy and hold’. Not all investments will be made in this manner, however, for the most part this logic will be applied. The ‘buy and hold’ approach can be justified by looking at the market trend since the FTSE 100 began in 1984:
It can be seen that after a dip such as in 1987 and in 2000 that the market tends to recover so despite the fragile economic situation a recovery, albeit a slow one as mentioned previously, can be envisaged.
Sector Reviews Sector: Power
The power sector is one of the main constituents of the FTSE 100. Utilities and Oil