India Uses Zones to Build Exports.

NEW DELHI – It takes more than an hour to drive the 25 miles of clogged highway linking New Delhi to Noida Special Economic Zone.

Inside the gate, a smooth four-lane road leads to electronics, engineering and textile plants that are at the heart of India’s plan to imitate China’s export success.

“It’s the kind of place where one can think of doing business,” said Vishnu Pal Singh, 51, whose Noida-based Optic Electronic India sells night-vision devices for rifles and tanks to Germany and Poland. “The zone offers top class infrastructure and tax benefits.”

India is counting on entrepreneurs such as Singh to revive a system it pioneered 45 years ago: using enclaves that provide lower taxes, faster permits and even their own power source to boost exports.

While India switched focus in the 1970s to industry tax breaks, China adopted the zone idea a decade later.

The system turned the former fishing village of Shenzhen into an export hub of 8.5 million people in 30 years and made China, with overseas sales of $1.2 trillion last year, the world’s largest exporter.

Now India, which shipped $165 billion worth of goods and services in the same period, is reviving zones as Prime Minister Manmohan Singh tries to raise manufacturing to 22 percent of the economy from 17 percent and double exports to 4 percent of global trade by 2020.

Investment in the special economic zones may double to about $66.2 billion by 2012, India’s Commerce Ministry said. Exports from the SEZs more than doubled in the 2009-10 fiscal year over the previous year.

“Improving infrastructure in the entire country will take a long time, so if you want to promote industry, you need to create more islands of excellence,” said Dharmakirti Joshi, chief economist at the Mumbai-based Indian unit of Standard and Poor’s. “India needs manufacturing to grow rapidly now to absorb the growing workforce.”

India set up its first zone in 1965 in the western state of Gujarat and had established another by 1975, said Lalit Behari Singhal, former director general of the Export Promotion Council of Export Oriented Units and Special Economic Zones in Delhi. In the next 25 years, six more were set up.

Poor land selection, insufficient incentives and inadequate transport ensured that the zones didn’t prosper, said Rajesh Sonthalia, a founding member of the export promotion council.

Only since 2005, when the government enacted laws favoring the zones, have they taken off. About 100 zones have opened since 2006, attracting $35 billion in investment, 60 times the level four years earlier. That helped create more than half a million jobs, the government said. About 478 more SEZs have been approved.

“China spent a lot of money creating infrastructure, which India did not do,” said Priyankar Bhikshu, head of India research at DTZ Holdings Plc in Gurgaon, near Delhi.

“As the true spirit of SEZs now emerges, export competitiveness will unfold in the next couple of years.”

The government-sponsored and private enclaves reduce red tape by offering a single office for environmental, tax and other government clearances.

Source : journalgazette.net