ABSTRACT
India introduced its first SEZ in 1965, and a decade passed before the second SEZ appeared. By 2002, the country had only seven SEZs. A main revision of India's SEZ regime came in 2005, with a new SEZ Act. While the number of SEZs has grown rapidly since the law's enactment, their actual performance is unclear. To understand whether the SEZs were likely a net contributor, we need to look at whether India had the institutional and policy environment that allowed it to solve the knowledge and incentive problems related to SEZs. The Indian SEZ planners got more things wrong than simply SEZ location. Infrastructure was inadequate, and communications, transport, and drainage were deficient. Liberalizing policies in the 1980s and 1990s do not seem to have mitigated cronyism, and may even have increased it. India seems to have gained little from the SEZ scheme, when considering all the costs and more limited benefits it has brought since its inception.
