Special Economic Zones and Foreign Capital

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The role of Special Economic Zones and Foreign Capital for the overall growth of the Indian economy is significant. Foreign capital still continues and will continue to play an important role in the over all development of the Indian economy. India can be a manufacturing hub for industries like textiles, automobiles, steel, metals, petroleum products, hardware, fertilizers, chemicals, agri-foods etc.

catering to international market requirements. The financial year 2005, witnessed an inflow of Foreign Direct Investment (FDI) to the tune of US $ 4 billion in to the Indian markets. Further, the subsequent years also registered quantum increase in the growth rate of Indian Special Economic Zones and Foreign Capital investments, made into the Indian markets. The Ministry of Commerce, Government of India estimates that the cumulative investments in the special Economic Zones of India would attract an investment of Rs.1 trillion and generate employment for 5, 00,000 people.

The main factors that facilitate the growth of Special Economic Zones and Foreign Capital infusions into the Indian markets are as follows -
  • Exemption from duties on all imports for project development
  • 10-year tax holiday in a block of the first 20 years
  • 10% FDI allowed through the automatic route for all manufacturing activities
  • Exemption from excise or Value Added Tax on domestic sourcing of capital goods for project development
  • Exemption from import duty, Value Added Tax and other taxes
  • Freedom to develop township in to the SEZ with residential areas, markets, play grounds, clubs and recreation centers without any restrictions on foreign ownership
  • Income tax holidays on business income
  • In-house Customs clearance facilities
  • Procedural ease and efficiency for speedy approvals, clearances and customs procedures and dispute resolution
  • Simplification of procedures and self-certification in the labor acts
  • A vibrant industrial city with abundant supply of skilled manpower, covering the entire spectrum of industrial and business expertise
  • Well connected with network of public transport, local railways and cabs
  • Pollution free environment with proper drainage and sewage system
  • Abundant supply of technically skilled manpower
  • Abundant supply of semi-skilled labor across all industry vertical
  • Easy access to airport and local Railway Station
  • Artificial harbor and handling bulk containers made operational through out the year
  • Houses both domestic and international air terminals to facilitate transit, to and fro from major domestic and international destinations
  • Has host of Public and Private Bank chains to offer financial assistance for business houses
  • Full authority to provide services such as water, electricity, security, restaurants and recreational facilities within the zone on purely commercial basis
  • No foreign ownership restrictions in developing zone infrastructure and no restrictions on repatriation
  • Development of world class infrastructural facilities in these units
  • Simplified procedures for development, operation, and maintenance of the Special Economic Zones and for setting up units and conducting such business activities
  • Single window clearance cell for the establishment of Special Economic Zone
  • Single window clearance cell within each and every Special Economic Zones
  • Single window clearance cell relating to formal requirements of Central as well as all State Governments
  • Easy and simplified compliance procedures and documentations
  • High importance is associated with the process of certification from international authorities
Functional Special Economic Zones and Foreign Capital infusion status are as follows -
  • Telecommunication company Nokia commenced its operation in Tamil Nadu with investment of US$ 100 million generating direct employment to 2800 personnel and indirect employment to 10000 workers
  • Quark City has been established in Chandigarh and attracted investment of US$ 0.5 billion and FDI of US$ 35000 by the end of May 2007
  • Flextronix in Tamil Nadu started its operation with investment worth US $100 million and generated employment for 3000 workers and few are under going training
  • Motorola and Foxconn, these two units has been set up with investment of US$ 200 million and it generated employment for 5000 workers Apache SEZ started to operate with an initial investment of US$ 50 million and created job opportunities for 25,000 workers
  • Brandix Apparel in Andhra Pradesh started its operation in March 2007 with an initial investment of US$ 100 million and 26000 personnel

Last Updated on May 29, 2015