Should Indian Government Invest More in SEZs?

Should Indian Government Invest More in SEZs?

SEZ are considered as one of the major export and manufacturing activity hubs. From last some years, the sector is not able to attract any fresh investments. The problem of new investments started the time when Minimum Alternate Tax as well as Dividend Distribution Tax was implemented in year 2011. In the Budget 2014-2015, FM Arun Jaitley said that government will take the steps to revive SEZs so that they can contribute in economic growth. Should government opt for another incentive package for SEZs?

Yes

• The country is facing problem of lower exports. The export figures have stayed around USD 300 billion in last three years with no significant growth.

• Special Economic Zones contributes around one-third in the country’s total exports and therefore it is important to revive the sector.

• Special Economic Zone provides employment to around 15 lakh people and if the sector fails it will be adversely affect the employment rate.

• As of now it is not possible for the government to focus on the all the sectors as it will require huge investment. So, revival of SEZ should remain the prime objective.

• There are 566 SEZs that are approved formally. However, only 185 are functioning. It is high time to focus on rest of SEZs.

No

• A lot of investment is already done in the Special Economic Zones and it is still not tapped to the full potential.

• Instead of making more investment, it will better to take tack the MAT levied on SEZs. It will automatically attract fresh investments.

• Even DDT has played a spoiled sport and has dampened the investor’s sentiment. So, government should roll back DDT.

• There is need to change the regulatory regime including the labor laws that can help to enhance the exports in the country.

• Government should take the steps to improve the overall economic environment. It is the need of the hour.

Conclusion

There is no doubt that SEZs are the pillars that enhances exports and provides employment to many people in the country. But the benefits cannot be taken as the reasons to keep on pumping the investments in Special Economic Zones. The government should carry out a deep analysis to understand the problems existing in the SEZs. It will only help the sector to flourish. Sometimes small simple changes lead to big gains.