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Economic impacts of SEZs: Theoretical approaches and analysis of newly notified SEZs in India


  • Aggarwal, Aradhna


This study aims at examining the economic impacts of SEZs in the Indian context. While doing so, it addresses the conceptual confusion about SEZs, outlines the evolution of SEZs; traces economic philosophies explaining the rationale and benefits of SEZs; extends existing theoretical literature to explain the economic impacts of SEZs; assesses the economic impacts of newly notified SEZs in India; reviews the strategies followed by various state governments in the implementation of the policy ; and draws policy implications. It argues that the existing economic theories donot adequately explain the rationale and contribution of SEZs. These approaches need to be extended by integrating the provisions of the theories of agglomeration economies and global value chains within the existing theoretical frameworks. It analyses the economic impacts of SEZs within the extended theoretical framework. It finds that while SEZs are stimulating direct investment and employment, their role appears to be more valuable in bringing about economic transformation from a resource-led economy to a skill and technology-led economy; from low value added economic activities to high value added economic activities; from low productive sectors to high productive sectors; and from unorganised to organized sectors, both at the national and regional levels. They have the potential of promoting new knowledge intensive industries; augmenting existing industrial clusters/industrial states; diversifying the local industrial base; and localizing global value chain. However, a strategic approach is required to reap the opportunities offered by SEZs.

Suggested Citation

  • Aggarwal, Aradhna, 2010. "Economic impacts of SEZs: Theoretical approaches and analysis of newly notified SEZs in India," MPRA Paper 20902, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:20902

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    References listed on IDEAS

    1. Gene M. Grossman, 1990. "Explaining Japan's Innovation and Trade: A Model of Quality Competition and Dynamic Comparative Advantage," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 8(2), pages 75-100, September.
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    Cited by:

    1. Antra Bhatt & Manas Puri & Andrea Appolloni, 2012. "SEZ Proliferation in India: Are the Objectives Being Realized?," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 19(1), pages 79-88, September.
    2. Rao, R. Kavita & Tandon, Suranjali & Mukherjee, Sacchidananda, 2016. "Corporate Tax: A brief assessment of some exemptions," Working Papers 16/165, National Institute of Public Finance and Policy.

    More about this item


    Special economic zones; Exports; FDI; Economic diversification; Agglomeration economies; global value chains; India;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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