ABSTRACT
India was among the first Asian countries to institute ‘export processing zones’ (EPZs), with the creation of an EPZ at Kandla in the state of Gujarat in 1965. Yet such zones did not form a part of India’s overall economic strategy until the passage in 2005 of the Special Economic Zones Act (SEZ Act) (Harding, this volume), which catapulted these zones to the centre of India’s economic ‘reforms’. The SEZ Act was justified as a measure to give statutory status to these
zones and provide them with a uniform, comprehensive policy framework. With the debate framed in this manner, much of the discussion on SEZs in India and elsewhere has focused on the question of whether or not these zones will fulfill such objectives and improve upon the earlier EPZ model. Secondarily, as a result of an explosion of protests across India against forced acquisition of peasants’ lands by state governments for the purpose of SEZs, there has also been considerable discussion of how ‘development’ and ‘industrialization’ can take place in a predominantly agricultural society. This paper argues, however, that both these approaches do not engage
with the far deeper and more complex implications that SEZs have for India’s polity and economy. SEZs are not merely another incentive policy for exports and foreign investment; they are rather a political intervention in India’s governance institutions. This is apparent if we place the Indian zones in the context of India’s own developing political economy and the international history of the concept of special zones. It is as a result of the real impact of SEZs and the far-reaching nature of this policy that the zones have, since early 2006, become such a flashpoint of conflict. The long term impact of these dynamics will be of interest not only in India but internationally as well.
Between 1965 and 2000 a total of seven EPZs were set up in India. These zones were small in size, relatively low in investment and employment and subject to the same laws and procedures as the rest of the country (excepting some tax concessions and specialized infrastructure facilities). The zones drew relatively small amounts of foreign investment. In 1985 the zones
were producing roughly 4.4 per cent of India’s manufactured exports (Aggarwal 2004). Yet, both in terms of policy and in terms of their contribution to India’s larger economy, the zones occupied a relatively marginal position. To understand why the concept of special zones made the transition from
this marginal position to the central one it has acquired today, it is important first to map the changes in the Indian polity that took place during this period. After a balance of payments crisis in 1991, India began to implement a structural adjustment programme, including the elements of regulatory rollback, fiscal conservatism, and trade and financial liberalization. These economic reforms have continued to the present day. Rather than the more ambiguous terms ‘globalization’ or ‘liberalization’ usually used to describe these changes, I will here use the term ‘neo-liberalism’, since it appears to more accurately describe the phenomena at work. The details of the politics around these reforms are beyond the scope of this
paper, but a very brief outline of some trends can provide the broad context for understanding SEZs. First, unlike in the case of, for instance, Britain under Thatcher, the Latin American nations under their military dictatorships or the USA under Reagan, neo-liberalism in India lacked (and continues to lack) a coherent institutional and political base. The support for neo-liberalism has, as in most countries, come from certain sections of the bureaucracy in alliance with large finance and industrial capitalists and the urban elite, but there has been no single political formation that has served to generate, organize and focus popular support for these policies. From the point of view of supporters of reforms, this has been both a
positive and a negative feature. The positive aspect has been that it has been possible to win over elements from most political parties, as well as selected powerful forces at various political levels, to specific reformist agendas at various points. This was described by Jenkins (1999) as ‘reforms by stealth’: a process of sweeping and deep policy changes achieved through behind-thescenes negotiations and engagements, without involving either public debate or open involvement of democratic institutions. This has produced in turn an apparent ‘consensus’ whereby all major political parties in one way or another endorse at least some aspects of neo-liberal reforms in their policy statements. The advantage of this becomes doubly apparent when one notes that there
has been an intensifying resistance to neo-liberal reforms. As in most other developing countries, the impact of neo-liberal reforms has been an intensification of rural distress, a collapse of state welfare systems and a sharp decline in the security and rights of workers (both in the formal and in the unorganized sectors). While the neo-liberal reforms have produced a rapidly rising rate of GDP growth, they have had simultaneously negative results for most Indians – in particular farmers, agricultural and urban workers and other segments of the poor – and have caused utter devastation for a significant section.1
