đź’ĄUPSC 2026, 2027 UAP Mentorship November Batch
Talk to Mentor

Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

Govt panel working on New SEZ Norms for Exporters to Access Domestic Market

Prelims Only | Economics | Mains Paper 3: Effects Of Liberalization On The Economy, Changes In Industrial Policy and their effects on Industrial Growth

Why in the News?

A government panel comprising officials from the Commerce and Industry Ministry, NITI Aayog, and exporters is drafting new Special Economic Zone (SEZ) norms to revive manufacturing and support exporters hit by steep U.S. tariffs in 2025.

Back2Basics: Special Economic Zones (SEZs) in India

  • Overview: Duty-free enclaves treated as foreign territory for trade, designed to boost exports, investment, and employment.
  • Legal Framework: Governed by the SEZ Act, 2005 and SEZ Rules, 2006 with single-window clearances and liberal FDI norms.
  • Policy Evolution: Introduced in 2000, replacing Export Processing Zones (EPZs) to strengthen export-led industrialization.
  • Objectives: Promote export growth, foreign and domestic investment, and infrastructure creation.
  • Incentives: Include duty-free imports, tax holidays, zero-rated GST, and ECB up to $500 million annually.
  • Scale: As of 2025, India has 276 operational SEZs– notably GIFT City (Gujarat), SEEPZ (Mumbai), and Noida SEZ.
  • Reform Outlook: The Development of Enterprise and Service Hubs (DESH) Bill 2022 aims to evolve SEZs into flexible, multi-use economic hubs linking domestic and global value chains.

Need for SEZ Norms Revision:

  • U.S. Tariff Impact: Recent U.S. tariff hikes on gems, jewellery, and textiles have reduced price competitiveness of India’s SEZ-based exporters, leading to production losses.
  • Export Decline: SEZ exports dropped to $172 billion (FY25), with domestic sales stagnating at 2%, exposing overdependence on foreign markets.
  • Idle Capacity & Job Losses: Fluctuating export demand left labour and machinery underutilised; reforms aim to let SEZs meet domestic orders during downturns.
  • Global Benchmarking: Indian SEZs lag China and Vietnam in scale, policy stability, and productivity, prompting structural reform for competitiveness.
  • Revenue Balance: The government seeks industry relief while safeguarding tax revenues, given SEZs’ extensive tax exemptions.

Proposed SEZ Reforms under Review:

  • Reverse Job Work Permission: SEZs may be allowed to accept domestic processing contracts to use idle capacity during off-peak seasons.
  • DTA Sales Flexibility: Partial permission for direct domestic sales, with duty adjustments to protect local manufacturers.
  • Simplified De-notification Rules: Faster conversion of non-performing SEZs into industrial parks or enterprise hubs.
  • Sectoral Support: Gems and jewellery exporters seek moratoriums, longer export obligations, and interest relief.
  • Integration with DESH Bill (2022): Adoption of hybrid zone model for both exports and domestic production under the Development of Enterprise and Service Hubs framework.
[UPSC 2010] The SEZ Act, 2005 which came into effect in February 2006 has certain objectives. In this context, consider the following:
1. Development of infrastructure facilities. 2. Promotion of investment from foreign sources. 3. Promotion of exports of services only.
Which of the above are the objectives of this Act?
Options: (a) 1 and 2 only* (b) 3 only (c) 2 and 3 only (d) 1,2 and 3

[UPSC 2016] Recently, India’s first ‘National Investment and Manufacturing Zone’ was proposed to be set up in-
Options: (a) Andhra Pradesh* (b) Gujarat (c) Maharashtra (d) Uttar Pradesh

 

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Subscribe
Notify of
0 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments

JOIN THE COMMUNITY

Join us across Social Media platforms.