Why this matters now
SEZs, their incentives, performance and the proposed DESH reform are tested in GS-3 as a tool for exports, manufacturing and FDI.
What are SEZs?
An SEZ is a geographically delineated, duty-free enclave treated as foreign territory for trade and tariffs, governed by the SEZ Act, 2005. SEZs offer simpler regulation, single-window clearance and tax/duty incentives to attract export-oriented units. They evolved from earlier Export Processing Zones (EPZs).
Objectives and incentives
SEZs aim to promote exports, FDI, infrastructure, employment and economic activity. Incentives historically included income-tax holidays, duty-free imports, and exemptions — though several tax benefits have since been phased out (e.g. with the sunset clause and MAT).
Performance, criticism and reform
SEZs boosted exports (especially IT/services) but faced criticism over land acquisition, uneven success, withdrawal of tax benefits, vacant land and the WTO-incompatibility of export-linked subsidies. The proposed DESH (Development of Enterprise and Service Hubs) Bill seeks to revamp them into broader development hubs serving both domestic and export markets.
UPSC angle
Know SEZs (SEZ Act 2005, duty-free enclaves treated as foreign territory, from EPZs), objectives (exports/FDI/jobs), incentives (now phased out), criticisms (land/WTO), and the proposed DESH Bill.
Frequently asked questions
What is a Special Economic Zone?
A duty-free enclave treated as foreign territory for trade and tariffs, with business-friendly rules to promote exports.
Which law governs SEZs in India?
The Special Economic Zones Act, 2005.
What incentives did SEZs offer?
Tax holidays, duty-free imports and simplified regulation, though several tax benefits have since been phased out.
What is the DESH Bill?
A proposed reform to convert SEZs into broader Development of Enterprise and Service Hubs serving domestic and export markets.