Special Economic Zones in India: an Economic Policy or a Political Intervention?

While Export Processing Zones have existed in India since 1965 (and were renamed Special Economic Zones in 2000), such zones became prominent in Indian policy and public debate only after they were given statutory status through the Special Economic Zones Act of 2005. Subsequently they have become by far the most controversial economic "reform" in India's recent history, triggering mass demonstrations, political uproar and violent clashes between government agencies and protesters.

This paper seeks to argue that such conflict, and the implications of SEZs for India's polity and economy, cannot be understood if one views such zones purely as an instrument of economic policy. Rather,a close reading of the SEZ Act and Rules, as well as a review of the current situation of India's political economy, shows that these zones can more appropriately be understood as a political-institutional intervention aimed at disempowering forces that seek to resist expansion of corporate capital in India. In this sense, SEZs in India go far beyond merely export incentives or industrial policy, and in fact constitute nothing less than an effort to reconfigure state institutions at local and regional levels. The results of such a reconfiguration, the paper argues, will not only be further conflict but economic and political instability of very large proportions.