Special Economic Zones (SEZs) as conceived by the government will be a "powerful instrument'' to achieve rapid growth in manufacturing, employment and exports, according to the President of the Confederation of Indian Industry (CII).

The SEZs offer "the only way forward'' in bridging the gap between India and South-East Asia, including China, in terms of manufacturing and employmentthe president said in the first pronouncement of the CII on the controversy surrounding SEZs.

He said that India's economic growth so far was fuelled by services and domestic demand. However, manufacturing had been hampered by the burdens of "embedded taxation, lack of infrastructure and enormous procedural issues,'' all of which added to costs and thus rendered industries uncompetitive. To the extent that the concept of SEZs was intended to address these three issues "bang on,'' it was most relevant.

On issues that had been raised in the context of the SEZs, the president said land should be acquired at "close to market rates,'' and also landowners should be given a share, say of ten to 15 per cent, in the post-facto appreciation of land values in the future. Emphasising that the focus of SEZs should be on manufacturing and not on services, he said the fiscal incentives given to units operating in the zones were mainly intended to encourage developers to undertake risks arising from the long gestation period of investment by alluring manufacturers to the zones until they reached a critical mass. Incentives for developers and industrial units were a necessary "initial distortion'' since "with zero distortion there will be no mobility.'' The gap in the fiscal incentives applicable to manufacturers inside and outside SEZs "should not be more than reasonable.''

Source: http://www.hindu.com