India still far from 'real' SEZs: Morgan Stanley

Two mega special economic zones (SEZs) being set up by Reliance Industries and a big rush to build other such projects has opened a new chapter in India's economy, but there is still a long road ahead when it comes to "real" large SEZs, according to experts at global investment banking major Morgan Stanley.

Ever since the new SEZ policy was approved in February this year, the government has already recieved above 100 applications to set up SEZs, but no serious efforts are being made to build "real" large SEZs and the policy needs to be reworked to achieve this target. One of the key purposes of SEZs is to build scale-related advantages, but most of the proposed SEZs are minuscule in size, Chetan Ahya and Mihir Sheth, Morgan Stanley's India-based senior economists, said in a latest India-focused report of the US-based firm.

The report said many of these proposed investments could be mere substitution of investments that would have otherwise taken place outside the SEZ area and the new SEZ investments are unlikely to provide the much-needed boost to Indian small and medium sector competitiveness.

Indicating that the current policies do not adequately promote large SEZs, the economists said small SEZs appear to have lost their relevance with the rapid globalisation of manufacturing scale.

The existing policy allows the minimum area for the SEZ area to be 1,000 hectares for multi-product zones, 100 hectares for product specific zones and just 10 hectares for
IT, gems and jewellery and biotechnology zones.