No scheme of the Indian government has evoked as much controversy in recent years as the creation of Special Economic Zones (SEZs) for industry aimed at exports. This has resulted in the displacement of poor farm families and villagers, brutal land acquisition, and gross human rights violations by the state at the behest of private capital. Thus far, the argument in the mainstream Indian media has tended to revolve around displacement and compensation, with an unspoken sentiment that if adequate compensation was given there would be no problems with SEZs.
The crux of the argument needs to change to address whether there is economic validity in SEZs. The stated rationale is a wholly economic one and constituted, in a nutshell, economic growth led by mostly private investment capital and the promotion of exports. However, this economic rationale falls apart when examined closely. While industrialization aimed at exports might be important, it has to be diversified in order to protect it from the whims of the international market. Past Indian SEZs have made neither a particularly high contribution to exports, nor are they diverse. In 2004-05, SEZs accounted for barely 5 percent of India's exports.
Among the stated benefits of the SEZ scheme has been an increase in employment and improvement in infrastructure. There is little evidence to suggest that either will happen with the SEZ plan. Employment generations are merely a guideline and not even a mandated requirement for approval. On the contrary, large corporations have always lobbied from the state, “labor flexibility". However, due to the relative strength of unions and other formations in India, this was impossible to implement throughout the country, which is why separate zones were required. In SEZ, the rights under the labor laws are now taken away.
One of the most important impacts of investment resulting in growth is widening the tax base of the national exchequer, which can then be used for a variety of social security measures, public sector undertakings, public health systems, scientific research, public education, subsidies for farmers, further industrialization measures, and a host of other social programs. The revenue loss coming from SEZs will amount to more than $40 billion over the next 5 years, by some conservative estimates, and possibly much more. This money could feed the country's 320 million hungry people for a couple of years or provide employment to at least 2 members of every rural family for the next 5 years! It does not bode well for Indian society to take this kind of a fiscal blow to cater to private capital and convert public money into private capital.
The SEZs have likewise seen no real infrastructure development except in real estate growth and speculation. It has already been reported from different areas that such land mafia are using the SEZs to carve up huge chunks of overpriced real estate.
The final argument given by Indian policy-makers for SEZs is the supposed Chinese success. The reality is that SEZs in China have resulted in arable land loss, inequities in development, rampant real estate speculation, labor violence and abuse, increasing crime including smuggling, sex trafficking, and child labor, as well as huge resource and environmental costs.
The widespread protests resulted in the federal government announcing a suspension of all land acquisition for establishing new SEZs in February 2007 until a new rehabilitation program for displaced people was realized. This temporary retreat on the part of the government represented a significant victory of sorts for the various movements and gave particular cheer for those believing in participatory democracy and people's enfranchisement.. But it is this variety that has exemplified the popular nature of resistance against SEZs and proved that a truly people-friendly and democratic industrialization alternative should be sought.
[This article is based on a much long paper written by the author for the political journal Socialism and Democracy, which can be found at: http://www.sdonline.org/46/ananthanarayanan.htm]
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