Indian Economy: News and Discussion (Apr 1 2011)

Suraj · Post by **Suraj** » 20 Apr 2011 07:23

Reliance Jamnagar is already the world's largest refinery: link

The Essar refinery in Vadinar is supposed to be 680,000bbl/day, which would mean two of the top 5 in India. I'm not sure if it is fully onstream though, unlike Jamnagar I and II.

SwamyG · Post by **SwamyG** » 20 Apr 2011 07:40

Case for rupee trade with Dhaka

When India’s commerce minister Anand Sharma calls on Bangladesh Prime Minister Sheikh Hasina next week to discuss a new trade deal, he won’t be talking about the possibility of trading in rupees.

However, many Indian and Bangladeshi businessmen would welcome trade in the rupee instead of the volatile dollar with its attendant exchange risks.

India sells some $2.5 billion of merchandise annually to Bangladesh and buys about one-tenth of that from its eastern neighbour, a trade imbalance which Sharma will try to address during his visit with promises of opening up to more duty free imports

Prem · Post by **Prem** » 20 Apr 2011 07:53

250 Billion is good news .
Cant wait to hit 1T mark of combined service and merchandise export . Indian economic engagement with rest of world must exceed 2T to have worthwhile impact on global xnomic and security structure. Last week i got Google alert on how India was preparing to increase engineering export to cross over 300 Billion Dollars by 2015 using R &d D and international collaboration route . I deleted it by chance lying lazy on Kanapali Beach .

Prem · Post by **Prem** » 20 Apr 2011 08:00

Younger generation set to industrialise India: Investor

SINGAPORE: Young Indians will lead the next wave of change to make India a truly industrialised nation in the next 10 to 15 years, says a Foreign Direct Investor in South Asia's largest economy."I have no doubts that the next biggest change will be brought about by the country's younger generation, putting India in the rightful place as an industrialised country by 2025," Singapore businessman Sat Pal Khattar said in an interview with PTI today.Khattar, who was awarded the Padma Shri by India this year, is one of the leading Singaporean businessmen, with a wide range of investments in the banking and hotel sectors, information technology companies and agri-businesses."We have seen dramatic change in the Indian business environment over the last two decades, but India needs to give more freedom to the business sector to attract foreign direct investment (FDI) and become a world-class economy," said Khattar, who has been investing in India since the early 1990s."India should not miss the opportunities to further grow its economy. I am confident that the young Indians, being the next power players in the economic and political environment, will not let go this opportunity to turn India into the next powerhouse," he said.

http://articles.economictimes.indiatime ... l-investor

somnath · Post by **somnath** » 20 Apr 2011 10:09

Suraj wrote: The Essar refinery in Vadinar is supposed to be 680,000bbl/day, which would mean two of the top 5 in India. I'm not sure if it is fully onstream though, unlike Jamnagar I and II.

Well, well, dont know whether the Essar refinery is top 5, but considering the price the country (rather the country's banks) have had to pay, rather been made to pay - the least they can do is to now operate it efficiently

Suraj · Post by **Suraj** » 20 Apr 2011 21:09

25% export growth in a year is a tall order - it means in 5 years, exports will be over $750 billion. Even a more sedate 15% growth rate will put it over $500 billion in half a decade. Unless global economic forces conspire otherwise, 15-20% CAGR is a doable goal; growth in exports from $40B to $250B in 10 years translates to just over 20% CAGR.

vina · Post by **vina** » 20 Apr 2011 21:20

Suraj wrote:25% export growth in a year is a tall order - it means in 5 years, exports will be over $750 billion. Even a more sedate 15% growth rate will put it over $500 billion in half a decade. Unless global economic forces conspire otherwise, 15-20% CAGR is a doable goal; growth in exports from $40B to $250B in 10 years translates to just over 20% CAGR.

Wasn't Germany @ $400B exports the largest exporting nation, until China overtook it recently ?. If your exports hit $400B or so we will be within the top 5 exporting nations I think.

That means we will have traveled a long way indeed from the DSE/ISI/Planning Commission geniuses and their export "pessimism" and miniscule share of global trade!

Suraj · Post by **Suraj** » 20 Apr 2011 22:34

Germany's merchandise exports are $1.3 trillion. China is slightly more than that, while US is $1.25 trillion. But yes, $450 billion odd would probably get us into the top 10. Ahead of us are a host of middle tier exporters - Spain, Taiwan, Belgium, Mexico, Russia, Singapore, HK and Canada, who all lie between $250B-400B. Just over $400B should also get us past UK once again. Around $550B would get us into the top 5, among the big leagues of traditional major exporters - China, Germany, US and Japan. The lowest of them - Japan - is at ~$760B currently.

The current export goal of $450B in three years requires 21.5% CAGR in exports, approx 1% more than the average export growth rate over the last decade. Doable, but I would rather be a little more conservative and be surprised. Keep in mind that we accomplished >20% average annual export growth rate over ten years despite two years of either falling or flat-lining growth between 2008-10.

Back until the 1950s or so, we were among the top 10 exporters and top 10 economics by nominal GDP in dollars. Then we fell out of both lists, falling a long way down. We've clawed our way back into one (top 10 GDP) and it's about time we did so for exports too. Our annual increment in export value now exceeds our total annual export value a decade ago. I don't know how accurate the data is (it's probably a pretty fair approximate), but this wiki data is a revealing view of how the past and future rankings look.

We've historically been a big trading nation, and even caused consternation elsewhere (Roman Empire etc) because we produced so much fine fabric, gems and spices that they begrudged the large losses of gold and silver given to us as payment. I'm sure the history watchers like ramana know more about this - my knowledge is somewhat sketchy.

It would be interesting to see how much of last fiscal year's $250B exports came from the SEZs. The year before last (2009-10), $50B out of $178B came from them. I would not be surprised if this year's figure is $75B or more, and soon to touch $100 billion just from these zones. I've said this before and will say it again - a stable exchange rate regime and controversies that once surrounded the word 'SEZ' are worth it.

Theo_Fidel · Post by **Theo_Fidel** » 21 Apr 2011 06:44

Suraj,

IIRC our service exports, notably software are not included in the export calculation. Incredibly it is classified as invisible's, whatever that means. Is it still that way?

If we include that $70 Billion we would already be in the $320 Billion range.

Our tendency to under report our economy always baffles me.

Suraj · Post by **Suraj** » 21 Apr 2011 07:11

Total services exports in 2009-10 was ~$100 billion, with services exports during the first half of 2010-11 being $56 billion (both figures from the Economic Survey (International Trade chapter). Assuming a similar end of year spike I'd guess they finished at $125 billion, for a total export volume of $375 billion ($250B merchandise + $125B services) during the last fiscal year 2010-11.

Rahul M · Post by **Rahul M** » 21 Apr 2011 07:16

We've historically been a big trading nation, and even caused consternation elsewhere (Roman Empire etc) because we produced so much fine fabric, gems and spices that they begrudged the large losses of gold and silver given to us as payment. I'm sure the history watchers like ramana know more about this - my knowledge is somewhat sketchy.

yup.

".....in no year does India drain us of less than 550,000,000 sesterces giving back her own ware, which are sold among us at 100 times their own cost ...." -Pliny the Elder, , Naturalis Historia.

VenkataS · Post by **VenkataS** » 21 Apr 2011 07:25

Why aren't services exports included in the general Exports category for us. Why only report merchandise exports when services are such a big part of our success story in the recent past. They are exports after all and we do earn export dollars through them, so I fail to understand why they aren't included under Exports. Is this true of all nations.

Are services exports excluded in China's $1.5 trillion in exports as mentioned here:
http://en.wikipedia.org/wiki/List_of_co ... by_exports

Suraj · Post by **Suraj** » 21 Apr 2011 07:26

The wikipedia list is merchandise exports only.

somnath · Post by **somnath** » 21 Apr 2011 07:32

An interesting idea from Kaushik Basu - legalise "bribe-giving"!

http://finmin.nic.in/WorkingPaper/Act_G ... _Legal.pdf

Basically what he is saying is that there are two types of bribes: "harassment bribes" and "non harassment bribes"..The former are basically the "fetch and carry" types that the common citizenry has to put up with, ie, bribe for a driving license and the like..KB proposes that the "bribe giver" is completely exonerated from any criminality in the act (currently, both bribe giver and taker are culpable)...The impact will be that there will be an incentive for each bribe-giver to act as a whistle blower (if not for anything else then to spite the leech!), while all bribe takers will remain aprehensive of potential whistle blowers...His hypothesis of course it that it will reduce corruption of this type as a result..

Its a problematic idea, and P Sainath today has written a sharp (I also though somewhat personalised) critique of this in the Hindu..But not altogether without merit!

Prem · Post by **Prem** » 21 Apr 2011 09:02

HT
Doubling 375 Billions $ worth export in next 3-4 years and then repeating the feat in next 5 years will take us over 1.5 T. This target can be achieved realistically within a decade if Indians sincerely put their brain and brawn behind it . 2020-2022 remain breakthrough period for Aryavarti Yindinas.

somnath · Post by **somnath** » 21 Apr 2011 09:52

Suraj wrote:It would be interesting to see how much of last fiscal year's $250B exports came from the SEZs. The year before last (2009-10), $50B out of $178B came from them. I would not be surprised if this year's figure is $75B or more, and soon to touch $100 billion just from these zones. I've said this before and will say it again - a stable exchange rate regime and controversies that once surrounded the word 'SEZ' are worth it

SEZs are a "policy scam"...People have simply shifted, or worse reclassified units as SEZs to avoid tax..RIL's Jamnagar refinery is a classic case..

Theo_Fidel wrote:IIRC our service exports, notably software are not included in the export calculation. Incredibly it is classified as invisible's, whatever that means. Is it still that way

It is..But software isnt classified under merchandise export anywhere either...Its captured under "services exports" everywhere, incl India...The "invisibles" account is a good proxy for India's services trade - why its called "invisibles" is beyond me..I think in early days they couldnt track which heads were contrbuting how much, hence clubbed a bunch of things toegther as "invisibles"!

vera_k · Post by **vera_k** » 21 Apr 2011 12:09

The X factor

More on which economy grew fastest in 2010.

Suraj · Post by **Suraj** » 21 Apr 2011 20:53

somnath wrote:
Suraj wrote:It would be interesting to see how much of last fiscal year's $250B exports came from the SEZs. The year before last (2009-10), $50B out of $178B came from them. I would not be surprised if this year's figure is $75B or more, and soon to touch $100 billion just from these zones. I've said this before and will say it again - a stable exchange rate regime and controversies that once surrounded the word 'SEZ' are worth it
SEZs are a "policy scam"...People have simply shifted, or worse reclassified units as SEZs to avoid tax..RIL's Jamnagar refinery is a classic case.

"scam" is such an overused word these days. It doesn't make sense to call these examples cases a scam - that would be the case if something underhanded or illegal were being done. Instead, they are just doing what the parameters of the Act permit them to do, and there's nothing wrong with that. The benefits have been obvious.

vera_k · Post by **vera_k** » 21 Apr 2011 20:56

Isn't the SEZ policy simply the easy way out of trying to force labour reforms all over?

SwamyG · Post by **SwamyG** » 22 Apr 2011 02:25

I have said it earlier - What we call bribe is fees elsewhere. In desh, at least the bribe goes into the pockets of poor man than as fees into rich big corporations.

Suraj · Post by **Suraj** » 22 Apr 2011 10:09

FIEO projects $300 billion in exports in current fiscal year

The Federation of Indian Export Organisations (FIEO) on Tuesday said the country's exports would cross USD 300-billion in 2011-12.

"In FY 11, exports touched USD 246-billion and we expect it to reach the USD 300-billion mark in FY 12. Asia, Latin America and Caribbean (LAC) region and Africa have been the main contributors to this growth," FIEO President, Ramu Deora, said in a press release issued here.

Also, the signing of Comprehensive Economic Cooperation Agreement (CECA) and Free Trade Agreement (FTA) with Asian countries is expected to raise Asia share in our exports to 55 per cent by 2014, he said.

Deora said that engineering, chemicals, pharma and gems and jewellery would be the important sectors contributing to the increase in exports. These exports would be supplemented by traditional sectors, he said.

FIEO expects the exports to grow to USD 500-billion by 2014-15.

Prem · Post by **Prem** » 22 Apr 2011 10:21

Suraj wrote:[FIEO expects the exports to grow to USD 500-billion by 2014-15.

Plus growth is service sector export has better potential. We should look forward to achieve realistic target of 750-800Billion $ total export in next 4 years plus additional inflow of NRI remmitence and FDI investemet etc.

somnath · Post by **somnath** » 22 Apr 2011 10:56

Suraj wrote:
somnath wrote: "scam" is such an overused word these days. It doesn't make sense to call these examples cases a scam - that would be the case if something underhanded or illegal were being done. Instead, they are just doing what the parameters of the Act permit them to do, and there's nothing wrong with that. The benefits have been obvious.

Well, if selling spectrum @ 5 year-old prices is a scam, then classifying a hitherto tax-liable income stream from a business to tax-free by a legal designation is also a scam...The only difference in the SEZ case is that there was no apparent "face" like Raja, and most people didnt understand the policy in any case...

The benefits are far from being obvious - if there have been any, they have been hidden pretty well...India till date has built no SEZ infrastructure of the level of Shenzhen or Gunagzhou or any of the storied Chinese examples...Most of the projects proposed (like RIL's own Navi Mumbai project) are largely real estate projects camoflaged as SEZ, and they havent taken off on various grounds in any case...In the meanwhile, companies have merrily gone about re-designating existing plants (India has to be the only cuntry that allows individual plants to be designated as SEZ!) and getting tax breaks - RIL's Jamnagar refinery is a classic case...

The finance ministry under PC was staunchly opposed to the SEZ policy, as were most people in the policy-making arena...But obvioulsy political pressure outwwighed better judgement...As result, we have no special infrastructure, no signifcantly different labour laws, no large industry clusters - only stand-alone units enjoying tax breaks for par for the course busienss...

When the entire efforts on public finance is towards elimination of exemptions, through the DTC and the GST, the Indian SEZ is a deliberate anachronism for nothing but crony capitalism...

Suraj · Post by **Suraj** » 22 Apr 2011 11:22

Guangzhou is not and was not a SEZ, just one of several cities opened up for foreign investment. Further, the Chinese policy framework went further than just setting up favoured areas tailored to exports - they located them around chosen cities (e.g. Xiamen) or just built a city in the area (Shenzhen, which was a fishing village 30 years ago). The Chinese didn't merely create tax or duty exempt regions - they also specified administrative reforms for those regions, providing for a clear localized administrative system and centralized push to build modern urban areas. Ours intends nothing of the sort, and ought not to be compared on the same lines.

classifying a hitherto tax-liable income stream from a business to tax-free by a legal designation is also a scam.

Pretty much everything that constitutes incentivizing economic activity at the cost of short term revenues can be called a scam then - STPIs, tax holidays, you name it. As I said, "scam" is overused. It's like the parable of the one who kept crying wolf

Regardless of who was allegedly 'staunchly opposed' to the SEZs, the fact remains that successive administrations - first the NDA, and then the UPA, pushed it through, despite the Singur and Nandigram days. I'm sure everyone wants their own cut, which they ultimately got, and is as far as the whole 'staunch opposition' went. I'm sure PC was staunchly opposed to the SEZ Act - he was famous for nickel and diming in his UPA-1 budget with the ghastly fringe benefits tax and assorted cesses. Hardly the stuff of removing tax distortions. I'm glad Pranabda abolished the FBT.

The SEZs were absolutely a shortcut to get around the fact that the kind of across the board administrative reforms and public policy efforts that characterized the Chinese SEZs couldn't be accomplished here.

Sure the Reliance Jamnagar SEZ looks odd. But look at the larger picture - Reliance was forced to shutter their retail petroleum sale business because GoI continued to subsidize the PSU oil cos during the 2006-2008 oil spike, without providing a level playing field to the private cos. Reliance Petroleum in effect retreated to an export centric model, with Jamnagar at its helm. Considering they were essentially forced out of the domestic business due to a GoI mandated distortionary system, what's wrong with them reaping the benefits on paper from the SEZ Act ? They aren't breaking any laws, and the law in question was implemented by separate administrations from either side of the aisle.

My metric is simple - compare the rate of growth of exports and foreign investment during the last decade, and in particular, that out of the SEZs, compared to what was achieved before around 2000-01. SEZs or EPZs have been around much before then, yet the last decade saw our exports skyrocket. Not only that, but the aggregate exports from SEZs have, and in particular, exports from SEZs notified under the 2005 act have risen a Musharraf-busting 460% box 7.4 of the economic survey doc.

somnath · Post by **somnath** » 22 Apr 2011 11:53

Suraj wrote:The SEZs were absolutely a shortcut to get around the fact that the kind of across the board administrative reforms and public policy efforts that characterized the Chinese SEZs couldn't be accomplished here.

Sure the Reliance Jamnagar SEZ looks odd. But look at the larger picture - Reliance was forced to shutter their retail petroleum sale business because GoI continued to subsidize the PSU oil cos during the 2006-2008 oil spike, without providing a level playing field to the private cos. Reliance Petroleum in effect retreated to an export centric model, with Jamnagar at its helm. Considering they were essentially forced out of the domestic business due to a GoI mandated distortionary system, what's wrong with them reaping the benefits on paper from the SEZ Act ? They aren't breaking any laws, and the law in question was implemented by separate administrations from either side of the aisle.

Barring tax breaks, there is nothign substantial in the legal and infrastructural construct of India's SEZs...Its nothing but a tax incentive scheme by another name...

About oil subsidies distorting oil prices, thats a different discussion...There is no prevention of any refinery to "export", and not just RIL, but Shell and Essar too started exporting when the oil subsidies ballooned...Ditto for a number of PSUs as well..The question is of giving tax breaks on income generated out of such exprts...Classfiying them as SEZs does nothing but give them these tax breaks..NOt just to oil refineries, but also every single exporter with enough political muscle to get their units classified as SEZ...

Suraj wrote:Not only that, but the aggregate exports from SEZs have, and in particular, exports from SEZs notified under the 2005 act have risen a Musharraf-busting 460% box 7.4 of the economic survey doc.

This is one of the many data points that proves the point...Existing EOUs have simply reclassified themselves as SEZs..So large part of the "growth" in SEZ exports is due to existing exports now being classified as SEZ exports...

Suraj · Post by **Suraj** » 22 Apr 2011 12:46

Marten wrote:Suraj, whenever you have the time, would you mind doing a brief assessment of the Dronagiri SEZ and why it seems to be a failed venture (it is precisely the kind of Shenzen venture that I personally was hoping would be replicated all over the country).

I have not looked at the Dronagiri SEZ in particular, but in general I expect nothing like the Chinese SEZs in India. Except for the fact that they're both called SEZs, there's not a lot of similarities. Our SEZs are essentially tax and duty except regions with easier labour conditions, tailored towards export growth and foreign investment. They are not urban initiatives. They are not efforts to create fresh cities. Thanks to the land acquisition issues, they're not even capable of being large contiguous regions.

In China, on the other hand, the government owns all the land, and private parties are lessors (99year terms I think). They didn't merely go about creating tax/duty privileged zones - they intended to create urban agglomerations around them. We intended nothing of the sort - if it happens, it's just an organic consequence.

somnath: To claim that our SEZs are just tax and duty privileged zones, or that SEZ export growth is partly because of EPZs/EOUs reclassifying themselves as SEZs is just stating the obvious, and just a testament to the fact that the SEZ Act was beneficial, or they they wouldn't have bothered to reclassify themselves. The benefits are in the numbers, after all. They used to constitute about $5 out of $40B odd a decade ago, and now constitute maybe $75-80B out of $250B. At some point SEZs will become superfluous, just as they have in China. Until then, they, the STPIs, and assorted incentive policies are doing their part to broaden economic activity within the country and raise the standard of living, which is what ultimately matters.

somnath · Post by **somnath** » 22 Apr 2011 17:51

Suraj wrote:To claim that our SEZs are just tax and duty privileged zones, or that SEZ export growth is partly because of EPZs/EOUs reclassifying themselves as SEZs is just stating the obvious, and just a testament to the fact that the SEZ Act was beneficial, or they they wouldn't have bothered to reclassify themselves

Thats tautological, Suraj...Obviously any rational enterprise will do that - if you can convert a taxable income stream into a tax-exempt income stream why wouldnt you? So tat is hardly a crtieria, ie that people have reclassified EOUs as SEZs..

The key touchstones of success should be a whether employment/economic activity created is a net positive to the taxes foregone...In a general policy regime thrust where the effort has been towards reducing exemptions and create a more non-distortionary tax framework, having a broad sweeping category of tax breaks benefiting a bunch fo legacy businesses is an anachronism...

The CAG report brought the point out pretty well..Funny, it was a CAG report that sparked off the latest crisis on 2G!

Here's an interesting perspective on SEZs
http://sanhati.com/wp-content/uploads/2 ... ez-act.pdf

Its a trifle ideological, but the facts shorn of the rhetoric too are quite clear...

rohiths · Post by **rohiths** » 22 Apr 2011 19:03

^^ India had fixed exchange rates prior to the liberalization period. Due to high inflation the rupee had become overvalued. Hence the GDP figures look very close to China. The fact was that the economy was pretty weak during the 1980s and the early 1990s. The nominal GDP figures do not mean much at all since there was strict capital controls and the rupee dollar exchange rate was government controlled. It is wrong to say that India was close to China during the 1980s and we lost track in the 1990s. India started losing ground in the early 1980s only

RamaY · Post by **RamaY** » 22 Apr 2011 19:43

These GDP values and growth rates get murky when we bring conversion rates, forced devaluations etc...

For most of its early history, the RMB was pegged to the U.S. dollar at 2.46 yuan per USD (note: during the 1970s, it was appreciated until it reached 1.50 yuan per USD in 1980). When China's economy gradually opened in the 1980s, the RMB was devalued in order to improve the competitiveness of Chinese exports. Thus, the official RMB/USD exchange rate declined from 1.50 yuan in 1980 to 8.62 yuan by 1994 (lowest ever on the record). Improving current account balance during the latter half of the 1990s enabled the Chinese government to maintain a peg of 8.27 yuan per USD from 1997 to 2005.
As of January 25, 2011, the yuan is valued at 15.2 US cents (or 6.584 per US dollar),[27] which is €0.111 (or 9.008 per euro).

During the period 1950-1951 until mid-December 1973, India followed an exchange rate regime with the Rupee linked to the Pound Sterling, except for the devaluations in 1966 and 1971. When the Pound Sterling floated on June 23, 1972, the Rupee's link to the British unit was maintained-thus, paralleling the Pound's depreciation and de facto devaluation. In 1975, the Rupee's ties to the Pound Sterling were disengaged. India established a float exchange regime, with the Rupee's effective rate placed on a controlled, floating basis and linked to a "basket of currencies" of India's major trading partners. More recently, the Indian Rupee has been depreciating in step formation, but roughly in line with the fall in its Purchasing Power Parity since the early 1980s. While the PPP was 15 around 1982, the actual exchange rate was 9.30 per US dollar. After the devaluation, the Rupee underwent the change from a controlled regime to a "Managed" or "Dirty" float regime, where the market supposedly determines the exchange rate. In mid 2005, the actual rate was near 43.60.

Table for 1840 to 2000 historical exchange rates to the USD

Currency Code 2000 1990 1980 1970 1960 1950 1940 1930 1920 1910 1900 1890 1880 1870 1860 1850 1840
Pound Sterling GBP 0.6609 0.5632 0.4303 0.4167 0.3571 0.3564 0.2611 0.2057 0.2729 0.2056 0.2056 0.2057 0.2064 0.1790 0.2062 0.2053 0.2000
Deutsche Mark DEM 2.1272 1.6157 1.8177 3.6600 4.2 4.195 - - - - - - - - - - -
Indian Rupee INR 44.942 17.505 7.8629 7.5 4.7619 4.7619 - - - - - - - - - - -
Japanese Yen JPY 107.76 144.79 226.74 360 360 361.1 - - - - - - - - - - -
Swiss Franc CHF 1.6888 1.3892 1.6757 4.373 4.373 4.373 - - - - - - - - - - -

Theo_Fidel · Post by **Theo_Fidel** » 22 Apr 2011 19:51

The SEZ's were a vehicle for private developers to provide structure that government could not provide. SEZ's have a domestic & foreign tariff area AFAIK. No one big dares mess with GOI on taxes.

I don't know about others but I visited Mahindra World City SEZ near Chennai last year and was mighty impressed with their infrastructure. Nothing like it exists outside the main gates. Just some pic's. BMW has their factory in there. As does INFOSYS amongst many others. Over all it is a very successful policy at least in TN.

RamaY · Post by **RamaY** » 22 Apr 2011 20:26

True. It gave the freedom for the private India to create quality, often Eco-friendly and aesthetic, infrastructure.

Suraj · Post by **Suraj** » 22 Apr 2011 21:08

somnath: What's the purpose of belabouring the point that our SEZ Act did not create anything like Shenzhen etc ? That they call those cities SEZs is just one part of the story - they intended and accomplished a lot more of them. Our act is just a limited tax and duty benefit program to incentivize exports. It's done an excellent job of it, without even being dramatically parasitical the way you imply - even if entities have just rebranded themselves as SEZs, it's not as if overall export volume has remained stagnant with SEZs just comprising a larger share of the pie: fractionally they're not a whole lot off, from $5B/$40B to $75B/$250B.

I'm sure we'd all like a less distortionary tax policy framework, but idealism aside, that's seldom been the case. The SEZs were a testament to our inability to accomplish broad reforms - general land acquisition policy harmonization, environmental clearance provision, labour reforms, administrative reassignment and urbanization impetus to create new cities... Instead we just gave tax and duty benefits to help boost exports and foreign investment, along with employment and economic activity, which is obviously the case when exports rise from a mere $40B to $250B. Sure, the SEZ Act is a copout, but it's just a creation of essentially the ComMin+FinMin. Nothing more can be expected unless there's a much larger political consensus to create a broad policy framework where SEZs can create entire cities and physical infrastructure around them.

I'm sure Theo_Fidel and others have more in person anecdotes from places like Sriperumbudur SEZ and elsewhere - please post if you do.

Theo_Fidel · Post by **Theo_Fidel** » 22 Apr 2011 21:13

While we are at it here is the Railways Station. Yes this is an IR station. According to some just a scam...

SwamyG · Post by **SwamyG** » 22 Apr 2011 21:19

^^^
I think there are some pictures of that station in the Sky scraper city forums. In the city where I live, in maasa, a bus station has a very similar appearance. The SSC has fabulous pictures of good old Madras. And Mahindra City pictures are top notch.

ps: A pity they have the name onlee in English.

Abhijeet · Post by **Abhijeet** » 22 Apr 2011 23:54

Are the labour laws in Indian SEZs significantly different from those outside? Can workers be hired and fired without needing special government permissions etc?

Theo_Fidel · Post by **Theo_Fidel** » 23 Apr 2011 01:38

Labor laws are exactly the same.

States do have the power to amend those laws or selectively apply them. For instance TN has amended the laws on women working nights in SEZ areas.

Suraj · Post by **Suraj** » 23 Apr 2011 03:06

The labour law issue came under fire from the commies during UPA-1, who were staunchly against explicitly relaxed labour laws in all SEZs. The compromise was to delegate the laws to state authority and let them figure out what they want to apply. Some states, IIRC, wrote/rewrote their own labour acts to make things easier for SEZs in their territory, and thereby make them more attractive to investors.

It isn't Shenzhen, but here's the SSC thread on the Mahindra World City in Chennai. Not bad, I say. There's another in Jaipur now.
Mahindra World City, New Chennai

Ambar · Post by **Ambar** » 23 Apr 2011 08:19

These SEZ'd 'World City' concept is hardly new in India. Decades ago, 'Jindal Nagar' was built around their steel mill and packaging industry on the outskirts of Bangalore. With its own private roads, lawns, schools, nursing home and its own security. Luckily though, the housing and facilities was available to every employee of the company and not just super elites. One can hardly say the same about 'Sahara City', 'Mahindra city' or the Reliance cities. A middle class man may just as well forget about renting or buying a piece of real-estate in these elite cities. Besides,unless one confines their entire life to a 3 kms surrounding, whats the point of these 'private cities' anyways ?
Progress is when every village/town/city in the country would have such infrastructure.And when everyone from a sub-1 lac/p.a family to the Ambanis would all share and use the same infrastructure. We have a long way to go before we achieve something like that. These gated cities for the rich are hardly a step in right direction.

Suraj · Post by **Suraj** » 23 Apr 2011 08:59

These SEZs are not an affordable housing program, or even intended to be an egalitarian urban residential area. The residential facilities they do provide are tailored to those working there. The need for affordable quality of life in urban India is very much pertinent, but conflating that with the SEZs and blaming examples of the latter for not satisfying the former need isn't really meaningful.

Ambar · Post by **Ambar** » 23 Apr 2011 09:20

But it certain has negative implications. Apart from creating a 'green zone' for the rich, and the tax breaks they get by being branded as 'SEZ', they push the surrounding property prices outside their gates to astronomical levels. Sahara Housing's projects in Mysore and Lucknow are two prime examples how 'gated cities' triple the property prices in their surroundings making it impossible for the middleclass to own/rent anywhere close to these cities.SEZs , especially those on which high-end housing is built should attract a higher tax and not tax breaks.