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Dr.N.Moogana Goud
Prof and Director
SJC Institute of Technology
 ›
 


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While announcing its new Export-Import Policy in
2000 the Government of India also announced the
introduction of SEZs; deemed to be foreign
territory for the purposes of trade operations,
duties and tariffs.
Among all other incentives announced with the SEZ
Act to woo the investment, the most lucrative are
the100 percent tax exemption for industries on
export profits for first five years and the
provision of 100 percent foreign direct investment
in industries under automatic route.
›
 

 ›
 SEZs have become a buzzword in recent years
 entirely a new concept and are basically
modelled on the Export Processing Zones (EPZ)
that came up nearly five decades ago.
 special Economic zone is a geographical region
that
economic laws which are more liberal
than the usual economic laws in the country. .
The basic motto behind this is to increase
foreign investment.
 ›


deemed to be foreign
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purposes of trade




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ahina·s first SEZ at Shenzen ¶alone·

attracted over $ 30 billion in direct
investment.

 
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Over 234 companies received formal
approval,
162 companies received in-principle approval
to set up SEZs.
The Indian government is expecting an
investment to the tune of Rs.53,561 crore (USD
13274 million) and an
additional job creation for 15,75,452 in SEZs by
December 2009.
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 Foreign Investment in India
FDI
India welcomes foreign direct investment in almost all
sectors. Foreigners can directly invest in India either
by themselves or as a joint venture.
Opportunities exist for investing in India in sectors as
diverse as tourism and infrastructure, petrochemicals
and mining technology and engineering, real estate,
biotechnology, bio-informatics and nanotechnology.
India is also being seen as the global destination for
R&D, engineering design and prototype development
and a manufacturing hub for high technology products.
 &'
According to the current policy, FDI is not permitted
in the following sectors ²
aertain sectors, namely:
 Atomic energy;
 ottery business/gambling and betting;
 Agriculture (excluding floriculture, horticulture, seed
development, animal husbandry, pisciculture and
cultivation of vegetables, mushrooms, etc.)
 Plantations (excluding tea plantation)
 Retail Trading (other than single brand retail)
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 ' .&'2/
 2nd most attractive investment destination
among the Transnational aorporations (TNas)
² UNaTAD·s World Investment Report, 2005
 2nd most attractive investment destination ²
AT Kearney Business aonfidence Index, 2005
² Up from 3rd place in 2004, 6th place in 2003
and 15th place in 2002
 Among the top 3 investment ¶hot spots· for
2004-07
² UNaTAD & aorporate ocation ² April 2004

ost preferred destination for services - AT
Kearney·s 2005 Global Services ocation Index
(previously Offshore ocation Attractiveness
Index)
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Worlds Largest
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Stable Political
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World Leader in
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Skilled
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Young Population
Educated uman Strong Economic
80% is below 45
Resources Fundamentals
years
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Investing in India

Prior Permission
utomatic Route
(FIPB)

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No prior permission Prior Government
required pproval needed.
Inform Reserve Bank Decision generally
within 30 days of within 4-6 weeks
inflow/issue of shares
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3 Existing joint venture is defunct or sick
 Proposals falling outside notified sectoral policy/caps
or sectors in which FDI is not permitted
FIPB Route (Approval Route)
 In all other cases of foreign investment, where the
project does not qualify for automatic approval, as
given above, prior approval is required from FIPB.
 Decision of the FIPB is normally conveyed within 30
days of submitting the application.
 The proposal for foreign investment is decided on a
case-to-case basis depending upon the merits of the
case and in accordance with the prescribed sectoral
policy.
 Foreign Direct Investment in
India
 

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 Fact That ttracts Foreign Investment
towards SEZ in India
The incentives and amenities offered to the units
in SEZs for drawing foreign investment into the
SEZs, includes:
Duty free domestic procurement of goods for
operation, development and maintenance of SEZ
units.
Exemption from minimum alternate tax as per the
Income Tax Act under 115JB.
window clearance for state and central level
approvals
Freedom from state sales tax and other duties
for development of SEZs
The major amenities and incentives available to
SEZ constructors

I
PAaT OF SEZs ON FDI
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 The government hopes that the SEZs will bring in
billions of dollars in investment and create over a
million new

  
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The SEZ Act has brought in foreign direct investment. Nokia,

Flextronics, Ascendas, Foxconn Tech, Apache Software and
Brandix (a Sri ankan textile company) have already invested in
India because of SEZs.




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Duty-free imports of capital goods and inputs for
production for Export
iberal access to foreign exchange
Encouragement to FDI
Simplified, ´one-stopµ approvals
Generous tax concessions esp. in early years
Flexible abour aws
imitations on sales within the country
Better Infrastructure (Power, Transport &
aommunications)

We will note the differences between ahina and India

later.
 &
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ïnfortunately, the impact of zones on FDI is hard to gauge
given the lack of data. Many zones do not track foreign
investment flows separately, and data is uneven.
vailable data suggests that SEZs are an important destination
of FDI in some countries.
In the Philippines FDI flows increased from 30 percent
1997 to over 81 percent in 2000 (ïNCTD, 2003).

In Bangladesh, $103 million of the $328 million of FDI inflows

were registered in EPZs

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in China, SEZs account for over 80 percent of cumulative FDI

 a     

India and ahina, the two

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economies for their respective GDP growth.
et us compare how both India and ahina, the two
emerging market economies are behaving in
economic spheres.
As in the year 2005 the GDP in ahina was at $2.2 trillions compared to
India at $700 billions
In Foreign Trade 2005, ahina owned $1.4 trillions compared to $230
billions for India.
° In Foreign Exchanges Services 2005, ahina had $820 billions and
India at $147 billions.
° With regards to Foreign Direct Investments as in 2005, ahina had
$60 billions compared to India at $5 billions.
 ›
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Dheldden, the Indian arm of FDI, also released a study

called 'India as FDI Destination' #I

The country is not realising its full potential because of the
business environment and policy- related impediments.
The promise of $500 million-plus investment opportunities in
diverse sectors in India was marred by the obstacles at various
levels.
Multiplicity of agencies are also undermining the investment
efforts in the country.
Many agencies are engaged in doing similar activities
relating to FDI -- such as FIPB, DIPP, FII, IC, SI,
and so on," the study said
Bureaucratic delays, discretionary interpretation,
vested interests, bias and subjective practices are
retarding the pace of FDI in India, it said.
Specific sectors include private banking where RBI
approval is required for FDI beyond 5 per cent.

The study said despite these impediments, India

remains an attractive destination for its high returns
in foreign investment at 20 per cent, compared to
China (13 per cent) and Thailand (12 per cent).
Comparing India and China, Fingar said though both
countries are most sought after FDI targets of
multinationals, "their success story is quite opposite".
"While others (including China) seek to move from
attracting FDI in manufacturing and assembly-line
operations to the service sector, India is doing just
the opposite, from success in the service sector to
the manufacturing, such as
SEZs," she said.
SEZs would be complementing India's success in the
service sector, she said, adding the boom in retail
and service sector of IT and IT-enabled services and
BPOs had a 'knock on' effect on the real estate