Abstract:
Empirical evidence on the effectiveness of recent India’s Special Economic Zone (SEZ)
policy over Export Processing Zone structure is analysed in this article by aggregating
data of seven conventional SEZs from 1986–1987 to 2007–2008. The study reveals
that introduction of SEZs in place of its predecessor, the Export Processing Zone, is
having a significant and positive impact on its trade performance at the aggregate level.
However, in terms of contribution to national trade, the Indian SEZs are lagging way
behind the expectations of policymakers. Furthermore, the SEZ policy does not seem to
be successful in diversifying the exports basket, which in turn has affected the direction
of exports by the SEZs. Moreover, these zones were found to be highly susceptible to
external shocks. Thus, we strongly argue in favour of a care in deciding the sectoral
choice of SEZs and careful scrutiny of its approval across major Indian states
