Essay Example: Impact of Special Trade Zones in India on a Socio-Economic Level

Published: 2022-02-24
Essay Example: Impact of Special Trade Zones in India on a Socio-Economic Level
Type of paper:  Research paper
Categories:  Economics Export India
Pages: 7
Wordcount: 1878 words
16 min read

India's Special Economic Zones (SEZs), are part of the industrial and export promotion policy and they are meant to open up the trade avenues that can be used to improve the quality of life of the residents and to increase the government revenue. The zones are faced with numerous challenges and one of them is that there are about 25,000 acres of land that lies unutilized. The zone is not flexible enough to allow for the necessary changes to improve the way the land is utilized. The performance the zones has been low since it was launched and this is attributed to a number of factors that affect these zones. There is a need for the Indian government to restructure and review the parts that are underperforming and come up with reliable solutions to these areas. The intended socio-economic benefits from these zones are yet to be achieved. In the analysis done in this essay, the aim is to analyze the impacts of these zones on the socio-economic development in the areas where they are found.

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The Zones and Globalization

The trade zones are seen as a way of bringing the globalization and its benefits closer to the people and to the borders. The zones are important drivers of the neoliberal globalization in the country. However, the way these zones acquire and use land is still a challenge and this is the main reason why they face a lot of resistance from the people of India. According to most of the citizens, the zones are used by the greedy leaders to grab land for their own use. Some of the lands that have been allocated to these zones are yet to be used. In places like Gurgaon, the zones have been in existence for many years. However, their benefit is not as the locals expected. The special trade zones policy was launched in 2005 and the main aim was to attract both local and international investors into the country (Anwar & Carmody, 2016). The other aims were to improve the infrastructure is the areas, improve the living standards of the people in the regions and to increase knowledge-based agriculture and business.

Since independence, the agricultural sector has been sluggish in India. The policy to introduce these zones in the countryside was meant to boost the agricultural activities and to encourage more people to participate in agricultural activities. However, the policy opened new chances for some of the rich people to acquire and from the peasants and transfer it to the rich. The neoliberal policies used in the country since 1999 increased the ability of the elites to access and accumulate wealth. The special trade zones were a continuation of the same. Indi was the first country to introduce the social trade zones in Asia but the benefits that were expected were overshadowed by illegalities and poor management. The neoliberal policies used in these zones are about creating a free market and a free trade (Anwar & Carmody, 2016). The poor development and achievement of the goals can be improved by the government through economic policies that will reduce the accumulation of wealth by the rich at the expense of the poor and the grabbing of land.

Investment, Trade, and Employment in the Special Trade Zones

The rate of unemployment is high in India and the government planned to use special trade zones to encourage more investment and create employment. The zones were intended to tackle the tactical bottlenecks that were created by the high tariffs, business barriers, taxation and infrastructure deficiency. The development of infrastructure is slow and requires high investments. However, the trade zones were viewed as the easier way to promote infrastructure and attract private investors to invest in the areas that were viewed as poorly developed. As of today, the trade zones have attracted many investors and as by November 2007, there were about 7 Central Government SEZs and 12 private investment sections worth about Rs.4,638.98 (Deepak, 2012). The regions where the zones are located have the advantage of accessing better infrastructure as compared to the time that the centers were not in place.

The trade zones created employment to the people in the areas. In 2005, the seven zones owned by the government had employed a total of 1,081,494 people. The number is expected to grow annually as more people invest in the zones. By March 208, it was estimated that the zones would create one million direct jobs and over 23,000 indirect jobs by the end of 2009. The zones have about 1122 approved units within the zones and this diversified nature of the zones increases the jobs created. It is estimated that the zones have created employment across 15 states in India and this totals to about 1, 46,128 people (Deepak, 2012). However, the intended employment was to create a higher number of employment opportunities and the deficit is as a result of poor management of resources and low utilization of the available resources. The government should intervene to create a better working environment that can create a large number of jobs. More resources and policies can improve the situation.

Corruption and land grabbing

In order to increase the competitiveness of India in the world market, the government enacted the economic zones in the aim of increasing the productivity of the available resources. However, there are views that these zones have harbored more evils than the good they were supposed to achieve. The first challenge that has faced the zones is the displacement of thousands of people from the areas where the zones are created. The activists in the country have openly faced the government in protest of the move to displace thousands of people from their homes to create room for the zones. The views that lead to these protests is that some of the lands where such displacement has happened, the land is not put into use and the residents lose their land for no gain. Some other people find it unworthy to move the residents and fail to achieve the economic and social goals of the zones. In the state of Goa, there have been many cases of corruption, whereby some of the powerful government officials have used the zones to get free land and use it for their own benefits (Sampat, 2010). The government is blamed for the increased use of the zones to enrich the few people who are in power.

The conditions in India can be related to the conditions observed in most of the countries where similar policies are put in place to help the citizens to achieve their economic development. The same was observed in Taiwan, Mexico, Singapore, and the Philippines among other countries, where the government policies to create trade zones open chances for a few individuals to get rich. The other issue affecting the Indian trade zones is that many corporations open branches in these zones and they exploit the employees in the area. Most of the employees who are employed in the special trade zones earn below the reasonable wages and this can be solved by the government through policies that regulate the employment in these zones (Sampat, 2010). The trade operations should be monitored to make sure that they are in line with the country's labor laws.

One of the main reasons why there is increased corruption is because of the presence of state-owned development corporations in the trade zones. Research shows that there are many areas where the state-owned corporations lead in the corrupt land deals. When the political class have access to the special trade zones and can use them for real estate investments, there are high chances that they will be corrupt. The areas are also likely to experience an increase in the number of houses and the houses are usually overrated with no regard to the potential of the local people to afford the high rates. The resultant outcomes are that many people do not afford the houses and the rich people can use the facilities while the local people, who are probably the former owners of these lands remain landless. The use of the policies that guide and protect the development of such housing units can reduce the appetite of the rich to grab the land in the special trade zones. Since the implementation of the policy in the special trade zones, there have been numerous accusations about the increased rent and this is associated with the land grabbing issues. The rates used to set the prices in the trade zones should be modified by the government to accommodate more people who are not rich enough to buy property (Alkon, 2018). The management of the distribution of resources will increase the equality among the citizens.

Poor Planning

The other concern about the special trade zones is that there is poor planning of the resources and the investors fail to consider the key issues that matter to their investments before they allocate resources. For example, some of the trade zones are located in areas where there is no infrastructure, labor, market conditions and technology. The dynamics of land distribution in India also attract a lot of controversies and poor planning contributes to the challenge. For instance, the allocation of the resources to the poor people and the compensation of the displaced people from their lands should be managed in a way that all of them get satisfied with the process. The status of the poor people in India has not improved over the past decade and this is also a sign of poor planning of the resources. In some parts like Gujarat, the development policies are largely dependent on land distribution policies (Alkon, 2018). However, the government can improve the situation by enacting laws that support equality in land distribution.

Barriers to the evolution of the Trade Zones

The rate at which the trade zones grow is low as compared to what the policy intended. The first barrier is that there is a disconnection between the macroeconomic and microeconomic policies in the zones. The government should make sure that the trade policies applied in India are also effective in the growth and development of the zones. The exchange rates, taxation, political and economic stability are some of the issues that affect the growth of these areas. Some taxation policies increase the burden of importing the necessary machinery to be used in the trade zones. Such policies reduce the ability of private investors to allocate resources to the development of the trade zones (Aggarwal, 2012). The issue can be solved by ensuring there is a good relationship between the policies used by the government and the development goals of the trade zones. The model below shows the relationship.

Employment Exports Investment Economic transformation Social transformation

International conditions

State intervention

SEZ-led economic and social transformation

Domestic conditions


Performance of SEZs

The model shows that the trade zones need to consider the international conditions that support their development, increase the use of the intervention to increase the success of the trade operations and also employ the macro policies that suit the zones. The domestic conditions should be analyzed and the economic and social factors should be fit to develop the zones (Aggarwal, 2012). The trade zones can employ the international trade policies that have been proven in other countries to achieve their goals. However, the government should set the pace for the incre...

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Essay Example: Impact of Special Trade Zones in India on a Socio-Economic Level. (2022, Feb 24). Retrieved from

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