The government’s measure to boost exports by relaxing the minimum land requirement for special economic zones (SEZs) will serve its objective only to some extent as land requirement was not the only reason that the SEZs did not take off.
These measures, however, will help the IT and ITES-related industries to a certain degree. The government is placing its hopes on SEZs because in the past they are said to have contributed to boosting exports by 2,000 per cent to `4,76,000 crore in seven years. But global and domestic conditions were different in those seven years and the global trade scenario has changed immensely since then.
Even during that time SEZs never really took off because of huge problems relating to land acquisition. The states, too, have a major role to play, particularly in land acquisition. In many cases, even when they acquired the lands, they were unsuccessful because of protests by farmers and other landowners. SEZs in the name of manufacturing for exports became a cover for land-grabbing and commercial development (other than exports). The result was that of the 389 SEZs cleared, only 170 became operational.
Exporters, however, are still not fully satisfied as they want tax issues attended to if the government wants SEZs to be engines of growth. The relaxing of land norms for SEZs are just part of the overall package announced to boost exports. The other incentives include extending zero duty on export promotion capital goods beyond March 31 and lowering interest credit for labour-intensive industries like textiles, leather, engineering goods and sub-sectors of the engineering sector.
While concessions and subsidies are perhaps necessary to enable Indian exporters to compete with the neighbouring countries, often for the same markets with a lot more help from their governments, the fact remains that Indian industry is doing little to upgrade the goods they export. There is not much innovation or research and development to go in for more sophisticated value-added exports.
Increasing exports is certainly the need of the hour to finance the current account deficit, but the bigger need is to curb imports of goods that can easily be produced within the country. While exports touched $300.57 billion in 2012-13, a decline of 1.76 per cent, imports surged to $491.487 billion, an increase of 0.44 per cent. Why, for instance, is India flooded with myriad electronic items? Why does something as simple as a cellphone come from China, Korea and Japan? These imports are even more threatening than gold imports.