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This explains why for example the two Ambani brothers whose companies ostensibly plan to set up power plants and SEZs in Uttar Pradesh and Haryana - have both chosen sites that are close to the national capital New Delhi, displacing the poor farmers, where real estate prices are soaring.

Global Experience

A study done by Kolomak (2000) in Russia showed that "there is no systematic evidence of investment level growth in regions with tax breaks and concessions".

In another paper by Bond and Samuelson (1986) emphasized: Due to the absence of the developed institutions to constrain the state, if profits and tax revenue are low, the government can respond by increasing taxes ex post, and, thereby, depress incentives for restructuring. Consequently, transition economies like Ukraine appear to be in a trap of continual budgetary pressures, high and unstable taxation, significant tax evasion, and low investment in the economy as a whole.

A study of welfare effects by Hamada (1974) showed that an inflow of foreign capital aggravates resource misallocation and forces domestic producers to use more capital - intensive technologies. Thus the inflow of foreign capital induces an expansion in the capital intensive sector which is import-substituting. This import substitution causes a loss of tariff revenue.

Thus, SEZs today do not enjoy as much popularity among academicians as they did earlier.

What Next?

If the SEZs are meant to bring in all inclusive growth then they should pay taxes & make a positive contribution to the growth of the economy. In the past decade and a half of so called Liberalization, Privatization, Globalization the Indian ruling class has created its own 'shining' special zones divorced from the fate and future of the rest of the country. It is precisely for this reason that opposing the formation of SEZs. Allowing them to flourish will be the first step towards the destruction of whatever little democracy there is left in this country and a defeat of the very ideas of equality and justice.

2020: 1500 SEZs in India decided to form a new entity named as "UNITED STATES OF SEZS"!!!!

Concluded.

* Contributed by: -
Rarul Abrol & Saurabh Nanda,
MBA - IInd Year,
Institute of Management Technology, Ghaziabad.