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India as an Off-shoring Destination

As India is fast becoming a preferred destination for off-shore manufacturing, sustainable growth prospects in domestic economy is luring corporates across the world to invest in SEZ's. The current run for SEZ's is primarily driven by the boom in IT and ITES sectors.
According to NASSCOM, India's IT and ITES industry is expected to grow at a CAGR of 35% from the current levels of $12 billion to $148 billion by 2012.

Other category products such as telecom equipments, mobile phones and IT hardware equipments perfectly fit into SEZ's. Auto components, textiles and biotech are also ready to seize the opportunity on SEZ's.

Multiplier Effect

As SEZ's offer several tax incentives, these tax incentives could play a vital role in catalyzing economic growth. The impact of investments can have a multiplier effect on the economy with exponential employment generation and forex earnings along with the retention of the competitiveness of the industry. Thus, in a way multiplier effect negates the argument of revenue loss from SEZ's adopted by the finance ministry.

The Way Forward

SEZ's offer a host of opportunity for economic growth and their importance is being realized .The three important pillars of the SEZ Act are fiscal incentives, regulatory freedom and world-class infrastructure. But the question still remains whether the current SEZ Act is the way to go about it. We have had the examples of China and Philippines emulating the model of SEZ's for the benefit of their economies.

For India, size and location of these SEZ's; deep pockets and execution ability of the promoters / developers of SEZ's; political will and world-class infrastructure still remain major concerns. It is only when such issues have been resolved, we can hope to successfully implement the SEZ model in India and reaping its benefits for the development of the country.

Concluded.

Gaurav Aggarwal,
Master of Business Economics (MBE),
University of Delhi, South Campus,
Delhi.