Are India’s economic policies taking the country further from what was envisioned by the constitution? The SEZ Act 2005 certainly suggests this.

The Preamble to the Constitution of India describes India as a Socialist, Secular Democratic Republic. While one may argue about what kind of socialism India is to be, one cannot argue with the ethos of the Constitution that progress in India is to be owned by all people of India, that all citizens get to share is India’s development, in India’s material progress.

Unfortunately, the policies by recent governments have not reflected this ethos. The BJP led NDA government topped its policies with the India Shining campaign at a time when farmers were committing suicide and the divide between the rich and poor had increased. The campaign was an insult to citizens of India and the elections unexpectedly threw the BJP led NDA government.

The UPA government led by Congress came to power with claims of compassion to the poor. The CPI-M, an active member of the current government claimed to be the voice of the poor. However, industrial policies in Bengal and processes of industrialization have shown that the CPI-M has not taken the people’s concerns into account as it has aggressively tried to industrialize. Singur is a case in point.

The UPA government has also passed the SEZ 2005 Act. As per this act, private entrepreneurs and State governments can set up Special Economic Zones for manufacturing and for industries that will provide services for export. These industries will have significant economic benefits in form of exemption from any duty of Customs, exemption from any duty of excise, exemption from any service tax, exemption from securities transaction tax, and exemption from taxes on sales and purchases.   

Taxes are meant to provide for mechanisms of building of public utilities. However, with units within SEZ being exempt of such taxes, they contribute nothing to building of public utilities and infrastructure within the communities where they exist.

The government says that the SEZs will help bring direct investment into the country and help with employment. According to the government’s own website, 8 functional SEZs provide employment to little over one lakh people with an investment of Rs. 18.3 Billion. (The government has sanctioned a total of 181 SEZs.) While these numbers seem impressive, we need to examine them critically.
 
Rs 18.3 Billion investment is not for any public good – it is being invested into an insulated community and the profits are being taken out by investors. There is little for the local community or the common people in the country. So it really matters little whether that amount was Rs. 18.3 Trillion or Rs. 18.3 thousand. In addition, one lakh people are employed in over 300,000 square meters of land. Much higher levels of employment can be sustained – and are being sustained – in such land area in other parts of the country.

The government can argue that it will make money from income tax on the corporations and on the income earned by the employees. However, as a review of 2005-2006 budget shows, taxes from customs and duties were significantly more than income tax. This is the component that is being waived. Even the finance minister Mr. Chidambaran expressed concern over this.  

In effect, the government of India has created bubbles where people with large amounts of money can build businesses, employ local labour, and then export the products without any fiscal responsibilities to the people of India. That is, the people of India have no share of the activities or the wealth being generated in these bubbles.

In the past, while there were debates about the nature of industrialization, the government of India and its agencies argued that industrial development was for the people of India. Now, with the SEZ Act 2005, even that façade has been disposed.

In addition, the Act says nothing about how land will be acquired for SEZs, what kind of land will be used, what policies of compensation and rehabilitation will exist, etc. Thus, while states like MP, Maharashtra, Gujarat, Bengal, Orissa are not able to find land to rehabilitate people currently displaced by ongoing projects including those at the Narmada Valley, Singur, Kalinganagar, Hirakud, etc, they have the mandate to displace more people without any accountability. In the absence of any safeguards, this Act could very well turn out to be a huge land grab by rich multinationals and entrepreneurs. Neither does the law place any limits on the extent of land that will be handed over to SEZs - what then prevents the whole of a city or a state from being turned into an SEZ?

Thus people from all of these states are opposing the formation of SEZs. In Maharashtra, for example, farmers have come out in opposition to SEZs. Police and the state have had to make use of force to curtail these demonstrations against the government. So while large sections of the citizen of India are opposing these policies, why are the representatives of the people going ahead with these policies?

Those proposing such SEZs are huge industrial houses and multinationals that are set to make huge financial gains through such policies. For one, exemption from a variety of taxes and excise duties help them. Second, they are also exempt from checks and balances that usually allow civic society to ensure that large companies are somewhat accountable to the communities within which they exist. Why are the representatives of people of India so willing to accommodate wishes of large multinationals and industrial houses even against the wishes of their own constituencies? That is a question that each of us can answer for ourselves.

This SEZ Act also exposes government rhetoric in the past. With the setting up of SEZs, why would any industry want to exist outside an SEZ where they are allowed to operate and profit with no tax or social responsibilities – except those that they chose for Public Relationship purposes? In the past, government has constantly argued that such industrial development will lead to the development of our nation. They have argued that such industries, by taxes they pay, employment they provide, etc. So are these governments not creating processes that will hurt development?

There is nothing in the setting up of SEZs that helps local communities. Examples from the past – in Mexico, in other nations in South America, in Asia – have consistently shown that SEZs help to exploit local communities. While experts have pointed to the growth of Hong Kong as an example of SEZs working, even if such infrastructure was built inside the SEZ, how does it help the larger nation or citizens at large? They have no access to such infrastructure - the companies will set these up only to the extent it benefits them. And if SEZs are so helpful to local communities, why do we not see SEZs in the USA?

In reality, large business interests, not democratic processes have now defined our industrial policies to have evolved in a fashion that does not share national progress among citizens of India but keeps it in bubbles that are exclusively for the rich.