Special Economic Zone

Special Economic Zone (SEZ) is an important term frequently in the news. It is important to understand what it means and the implications for an area marked out as SEZ for the economy section of the UPSC syllabus. In this article, we give you a brief on SEZ basics for the IAS exam.

A Special Economic Zone (SEZ) is an area within a country where there are different trade and business laws from the remaining regions of the country. SEZs are broadly located inside the national borders of a country.

There are multiple aims of these zones including an increase in trade, an increase in the investment, more employment generation, and better administration. Countries create special economic zones motivated by the need to attract foreign direct investment (FDI). A company located within an SEZ will get many benefits; it will be able to produce and trade goods at globally competitive prices. Basically, in an SEZ, the economic laws that would apply in that geography would be different and more relaxed and conducive to commerce when compared to the other areas of the country.

Most number of SEZs in India is in the state of Tamil Nadu. Second is Telangana and Maharashtra comes in the third place.

As given by the government, the main objectives of establishing SEZs are:

  1. Generation of additional economic activity
  2. Promotion of exports of both goods and services
  3. Generation of employment opportunities
  4. Promotion of investment from foreign as well as domestic players
  5. Development of infrastructure facilities

SEZ approval mechanism

The developer of the property has to submit a proposal to the state government for approval. The state government will then forward this proposal, along with its own recommendation, to a Board of Approval within 45 days. This Board of Approval was constituted by the Central government in accordance with the SEZ Act. It has 19 members and all decisions are taken by consensus. It is chaired by the Secretary of the Department of Commerce. It is to be noted that the developer can also submit his proposal to the Board of Approval directly.

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