Special economic zone or land grab?
The Indian government has approved proposals for 170 special economic zones (SEZs) and counting. SEZs can invite foreign direct investment, provide jobs, and promote the development of secondary industries to service firms. Why, then, the spirited outcry over India’s recent moves in this direction? For one thing, many of the approved sites are located on prime agricultural land – leading to complaints that the SEZs are more of a coordinated land grab by the rich than coordinated economic development.
Creating so many SEZs would seem to exacerbate widening inequality in India – both in terms of individual income and national infrastructure. We’ve already seen the results of the technology revolution emanating from Bangalore: isolated areas of development with limited benefit to the broader economy. Destroying valuable agricultural plots seems especially ill-conceived, as farmers are not likely to make an easy transition to the jobs on offer at these SEZs.
India isn’t having too much trouble attracting foreign investment as it is. Okay, so maybe the government hasn’t hit the $10 billion a year target, and India lags China. But most observers expect FDI to India to continue to rise. In the next two years, Goldman Sachs plans to invest $1 billion in real estate and infrastructure. The Indian government would do better to focus on the real barriers to its foreign investment goals – namely inflexible labor laws and poor roads and other infrastructure.
See the recent World investment prospects to 2010: Boom or backlash? for more FDI predictions. Also, a while back we held an online discussion on whether the benefits of SEZs outweigh their costs. Finally, I highly recommend Goldman Sachs' slick new video projecting fantastic growth to 1950 for the BRICs (Brazil, Russia, India and China), if only for its beautiful presentation style.
Comments (12)
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SEZ are latest instruments, planned and executed by Government and Industrialists to grab prime land and other infrastructure at official rate and sell them at market rate.
The history shows that most of the land acquired by the Government at minimum rates have ben commercialised and sold at market rate by manipulations.
For industrialisation, one do not need SEZ. You tax poor people and grant incentives to big ones. Infosys is minting money, yet It does not pay any Income Tax. A poor worker earning Rs 1,10,000.00 is paying Income Tax. Income Tax is on income or defict , no one knows. Peopel earning billions do not need to pay Income Tax.
The same concept is being applied to SEZ. It is a scandal will end up in a mess. Already more than 10 farmers are commiting suicides every day.
That is hoe India functions .
Posted by: Subhash Parakh | Oct 11, 2006 10:47:05 AM
I agree with the comments of Subhash
Parakh above. If special economic zone is needed to provide better infrastructure to investors, it is not necessary to grant tax exemptions. Moreover, land should be provided at market prices and not throw away prices to these investors while paying low prices to farmers from whom land is acquired.Farmers should be paid at commercial rates, close to market rates.Labor laws should take care that labour is not exploited. Labour should not be paid very low wages nor should be forced to work for long hours.Special economic zones are not needed at cost of farmers and workers.Special economic zones principal fuction should be to provide good infrastructure and helpful government procedures in establishment and functioning of units.
Posted by: P C Verma | Oct 24, 2006 10:05:32 AM
the above said all are true, no doubt special economic zones are growth engines, but for an engine we have to use the fuel that is in the form of our primeland. for getting industrial development we have to sacrifice agricultural land but in this aspect corruption is non-permissable, this is due to fault in the system. as the people so the system. so every individual must be sinciere then system will work efficiently. in every state special economic zones are landgrabs but still that process is going on why because from that every one will be benefited.now-a-days Rural farmers are not interested to farming so that they wanted to sell their lands, in this regard somany middlemens and government came into scene and it was benefited through the resale to industrialists for higher profits, after that industrialists will be benefited through tax holidays. so special economic zones are land grabs but everybody will be benefited from that special economic zones.here we remember China developed through the concept of Special economic zones, from that SEZs they are getting more foreign capital and it was utilized in honesty manner so that now it was top of our economy.now i suggested that special economic zones not to banned but we have to suggest measures for minimize the fraud and corruption, for effective and efficient performance of specila economic zones which is useful for foster growth and development of the country.
Posted by: karunakar | Nov 26, 2006 7:29:00 AM
we should not forget east india company was here with only ship,wich rulled over us for 150 yrs. sez will never increase individual income' it will create a big gap in economic status of persons,agriculture is only heart & soul of india &there should be concentration
Posted by: pushkraj pardeshi | Jan 9, 2007 12:36:08 AM
In addition to fair market value now, the SEZ should offer the farmer an much smaller piece as an option. A little like donating the land for an airport, but keeping a small piece of the land next door with the idea that growth will make the area prosper and in time the small piece of land will be as valuable as the whole plot.
Posted by: MonkTrader | Jan 13, 2007 2:16:46 PM
ALL THE PROTEST ORGANISED AGAINST SEZ LAGS IN ONE CENTRAL ISSUE. THEY SHOULD HAVE A STRONG ALTERNATE PLAN.
Posted by: KIRAN LIMAYE | Feb 2, 2007 7:19:55 AM
Farmers should be made to rent the land on N years contract & should be paid based on real-estate quotient (to be decided by government), which should be recalculated every-year based on value of land each year !
Posted by: Vaibhav K. | Apr 8, 2007 12:15:39 PM
SEZs are a distant third best alternative -- i.e., their economic outcomes are neither competitively market-determined (in which case farmers would have had a much better deal, SEZ rentals would dwindle), nor do the policy interventions they entail (in India) lift the economy -- which fails the competitive-efficiency test -- to an alternative optimum configuration.
SEZs disenchant because of the following reasons:
- They seek to attract investment at the state level, but against subsidies, giveaways, and somewhat less than humane relocation (seldom rehabilitation) policies where the state targets dispossessed landholders because they are against the "interest of the nation/state/you-name-it". The Nandigram (March 14, 2007) episode in West Bengal showed that even the political affiliation of particular villages can matter. If inimical to the interests of the ruling party, it may elicit the wrath of the state administration.
- Selective subventions are all the more reason why there is an unusually large quota of fly-by-night operators alongside the genuine entrepreneurs. The former are either real-estate sharks who wnat to cash in directly real estate prices jump after the official go-ahead.(DLF presents a counterexample: it has offered market-determined prices to farners in the Gurgaon region and might have to pay 4-to-5 times the 'official' rate). Other entrants are domestic-tariff-area (DTA) industrialists who(understandably) desire to escape the economically/commercially stifling ambience of what is still a largely dirigistic, taxation-heavy, factor-inflexible economy. The latter is plain from the fact that not all their units have exports as the main aim; they are far more assiduous in servicing the DTA
from a vantage position.
- Finally, there is little point in offering land, but withholding adequate infrastructure. Were the government to insist on providing it for only the (few) SEZ industrialists that would only compound the public subsidy-cost; it would also increase the investor attractiveness of SEZs as compared to the DTA.
Indeed, the latest worry about China is not about the undervaluation of the renminbi, but more about how to address, and defuse, the inequalities being generated by its 10%-plus rate of growth. The nature of the Chinese state might be such that a soft-landing might be managed. But the denouement in India may be surprisingly charged.
SEZs need, therefore, to give way to policies that introduce a smaller government, a bureaucratic hands-off, the freedom to invest across sectors, and promote contestable markets (with import competition, and privately financed infrastructure being two of the key factors). It will then become important, for all concerned, to develop every region, and facet, of India -- and to take the poor along on the ride.
ENDS
Posted by: soumya kanti mitra | Aug 13, 2007 5:52:23 AM
I do agree to the facts discussed in the forum but i feel a few are just baseless comments . For a country like india which is growing at more than 8% where agriculture contribute less than 10 % to gdp and having 65 % of people living on it dont we feel that its high time to have a strategic thinking into it. Yes there are lots of redtapism involved in land acquisitions but if we brood over it lot and keep it intact it will remain just as a missed opportunity for these subsistance farmers to have a good deal at the right time " make hay while the sun shines " corruption cannot be stopped in this and if not this something else .So its high time we see our agricultural lands as a strategic investment options and go for innovative use of existing land while keeping a balance
Posted by: shan | Jan 19, 2008 2:44:53 PM
I AM COMPLETELY AGREE WITH MR.LIMAYE THAT LAND SHOULD BE GIVEN ON RENT BASIS AND ITS RIGHT SHOULD BE PRESERVED BY THE GOVERMENT BY ARRANGING A LEGAL COMMEETEE AND WHOSE BUSINESS IS CLEAR TO THE PEOPLE.SO THE FARMER COULD GET THE RIGHT RENT OF THEIR LAND AS TIME CHANGES.
Posted by: nilesh sathe | Feb 14, 2008 10:13:24 AM
I also agree with Mr. Limaye... Land must be granted on rent and all its right should be reserved by the Government.
Posted by: Tax Liens | Jun 25, 2008 11:53:52 PM
Yes, even I am agreed with above statement - the poor who lose their livelihood forever are given some money in exchange. A lack of knowledge makes them burn the money rather than invest. The gainers from the sez's will be those with better purchasing power whereas the poor will be the silent onlookers from their huts.
Posted by: nina rai | Nov 25, 2008 9:07:15 PM