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A special economic zone is a geographical region where economic laws are more liberal than the country's general economic laws. The purpose of SEZ is to attract foreign and domestic investment both.

SEZ Act

The SEZ act 2005 was passed by the Parliament in May 2005 which received President's assent on 23rd June 2005. And finally it came into effect on 10th February 2006.

The objectives of this act are as follows:

Generation of additional economic activity.
Promotion of export of goods and services.
Promotion of investment from domestic and foreign sources.
Providing employment opportunities.
Advancement and development of infrastructural facilities.

As per the recent available data, formal approvals have been granted for setting up of 584 SEZs, Out of which 381 have been notified. And a total of 133 SEZs are making exports. Out of which 76 are IT related, 17 multi products and 40 are from other sector.

Impact/Benefits of SEZ

SEZs have played an important role in the creation of direct as well as indirect employment.
Overwhelming response is seen among the investors, both in India and abroad.
Increase in earning of foreign exchange and infrastructure development.
Contribution in human development facilities such as education, healthcare, social life etc.

Criticism

The farming community is criticizing the government of acquiring fertile land from them at heavily discounted price.
Critics say that the policy is being misused mainly by real estate developers rather than exporters.
Companies are shifting to SEZs just to seek advantage of the tax concession and not creating jobs as desired.

Government's Initiatives in response to the criticism

Acquisition of fertile land is being restricted.
The size of SEZs being limited.
Space allowed within SEZ for construction of shopping malls, housing is also being restricted.

Importance from Examination Point of View

2 Marker(2007 - SEZ)
2005(Main - Paper - I)
Q.3 - (c) Bring out the pros & cons of Special Economic Zone.
2010 (Pre) - Q. The SEZ act 2005, which came into effect in Feb 2006 has certain objectives. In this context consider the following:-
1. 1. Development of infrastructure facilities
2. Promotion of investment from foreign sources
3. Promotion of exports ofServicesonly.
Which of the following is/are true
Answer:1 & 2

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