By: Ravi Sinha
Track2Realty Exclusive
Once seen as very powerful economic tool for catalyzing the growth process during restructure and liberalization of economy, Special Economic Zones (SEZs) in India could not replicate the Chinese success story, as assumed. Track2Realty takes a look on the future of SEZs in India as realtors make a beeline to exit or extend the tax haven, and the government groping for fresh ideas.
Tax concessions, custom benefits and most importantly, land being granted at throw away prices; still Special Economic Zones (SEZs) have failed to take off in India. In the initial years of the SEZ Act providing liberal tax concessions to the developers of SEZs and the units therein, promoters from the real estate and information technology, among others, made a beeline for the same.
The Special Economic Zones Act (SEZA) 2005 was enacted with the underlying objective to boost economic activity, promote exports and investment from domestic and foreign sources, create employment opportunities and develop infrastructural activities. Keeping such objectives in mind, various fiscal incentives were provided to the SEZs under the Income Tax Act (ITA) 1961.
However, the planning for Special Economic Zones in India had some very specific gray areas at conceptual level. The stated primary objective of India’s SEZ Program has been to ensure the export-led growth by attracting FDI and other private sector investments and thus, using SEZ as catalyst in the process of reforms, economic development, employment creation, and regional development.
The dream to achieve the quantum of FDI flow equivalent to or more than China always remained far fetched because of the perceived poor standing of India by multinationals as reflected from trans-nationality index and perhaps, an inadequate marketing of the country ‘as a profitable investment destination’. This coupled with the ad-hoc approach towards the holistic planning for Indian SEZs to strategically position them as complementary to each other and not competing made it very difficult to attract FDI. SEZs thus emerged as a “status symbol” of realty companies and many of them were positioned to compete with each other for FDI and private investment.
..…to be continued
