Institute for Social and Economic Change

Established in 1972 by Professor V K R V Rao, ISEC is an All-India Institute for Interdisciplinary Research and Training in the Social Sciences

Understanding the Fiscal Implications of SEZs in India: An Exploration in Resource Cost Approach – isec

Understanding the Fiscal Implications of SEZs in India: An Exploration in Resource Cost Approach

Abstract

This paper analyses the fiscal implications of SEZs on the government exchequer. Specifically, this paper proposes the following: (1) an argument that makes a case for the paramount importance of studying the fiscal dimensions of SEZs and (2) a framework for analysing the fiscal dimensions of SEZs. This framework is then employed to find the actual fiscal dimensions of SEZs in the country. The analysis is based on aggregating data collected from seven conventional SEZs and taking 1990-91 to 2007-08 as the reference period. The exercise reveals that the Government has spent huge sums of money to play the role of a trade facilitator and as a fiscal manager has lost considerable revenue. This, in turn, has affected both revenue and capital expenditure of the government’s budget. Given the magnitude of these costs, one cannot but raise questions about the actual contributions of these enclaves to the national fiscal health and the feasibility of relentlessly adopting measures that seeks to promote these zones across the nation.

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