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India introduced a new SEZ Act in 2005, modeled on the Chinese SEZ scheme. The goal was to further promote zone exports and develop zones of larger scale (Palit and Bhattacharjee, 2008: 88-9, 97; Seshadri, 2011a: 28). With the new law, the number of zones has increased.
By the end of 2010, India had approved as many as 580 SEZs, 112 of which were actually exporting. 3 Alas, many SEZs became grounds for real estate speculation (Mitra, 2007; Seshadri, 2011b).
Meanwhile, there has been much controversy over the dispossession of farm land, with opposition to SEZ development resulting in violence (Roy, 2009: 79). The 2005 Act has also been criticized for pricing farmers out from their lands and causing “conversion of the fertile land into cement structures” (Mitra, 2007: 13; Levien, 2011; Kahn, 2008: 14).
Many SEZ plans have been obstructed by unpredictable and burdensome government policies. The SEZs that currently operate are allegedly not very profitable (Govardan and Srivastav, 2012). Let us start with India’s possible knowledge problem. From the start, the Indian governmental authorities often determined both zone location and the nature of zone production. In several cases, they chose poor, backward and unattractive zone locations. As a result, SEZ investments did not match market conditions.
The most successful zones were already high performing before becoming SEZs. In addition, SEZ regulations frequently posed obstacles for businesses in the zones to subcontract with firms outside the zones (Seshadri and Storr, 2010: 363).