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ZENITH

International Journal of Multidisciplinary Research Vol.1 Issue 7, November 2011, ISSN 2231 5780

IMPACT OF SPECIAL ECONOMIC ZONE (SPZ) ON HUMAN DEVELOPMENT AND POVERTY REDUCTION: AN INDIAN EXPERIENCE
DR. A. ABDUL RAHEEM*
*Assistant Professor (SS), Department of Economics, The New College, University of Madras, Chennai - 14.

ABSTRACT Special Economic Zones (SEZs) were established in many countries as testing grounds for implementation of liberal market economy principles. SEZs are viewed as instruments enhancing the acceptability and credibility of transformation policies, attracting domestic and foreign investment and also for the opening up of the economy. SEZs in India seek to promote the value addition component in exports, generate employment as well as mobilise foreign exchange. Globally, many countries initiated Free Trade Agreements (FTAs) which eventually led to a spurt in investments in infrastructure developments for Free Trade Zones (FTZs) and SEZs. A close examination of the evolution of SEZs in countries with similar economies as India eg; China, Iran, UAE and Jordan, will help us to understand their success stories and thereby implement those factors, in order to curb the SEZ bottlenecks faced by India today. The Shenzhen SEZ in China is a perfect example of a SEZ success story. In India, the government has been proactive in the development of SEZs. They have formulated policies, reviewed them occasionally and also ensured that ample facilities are provided to the SEZ developers as well as the companies setting up units in SEZs. These favourable conditions resulted in the biggest ever corporate rush for the development of SEZs in India. Over 234 companies received formal approval, 162 companies received in-principle approval and 100 companies received notification to set up SEZs. The Indian government is expecting an investment to the tune of Rs.53,561 crore (USD 13274 million) and an additional job creation for 15,75,452 individuals in SEZs by December 2009. Therefore, this paper aims to examine impact of Special Economic Zone (SEZ) on human development and poverty reduction in India. ______________________________________________________________________________ 1.1 INTRODUCTION Special Economic Zone (SEZ) is a geographical region that has more liberal economic laws than the ones generally followed in the rest of the country. The category 'SEZ' covers a broad range of more specific zone types: Free Trade Zones (FTZ), Export Processing Zones (EPZ), Free Zones (FZ), Industrial Estates (IE), Free Ports, Urban Enterprise Zones and others. A FTZ (Free Trade Zone) is a particular area of a country where normal trade barriers & requirements like taxes, tariffs, and quotas are either eliminated or reduced, to attract businesses & investment. FTZs are usually characterised by labour intensive manufacturing set-ups that involve a high level of imports & exports. These kinds of zones are mostly prevalent in developing nations, and further in under-developed regions of that nation. In India, FTZs are seen as those areas where goods maybe landed, handled, manufactured or reconfigured, & re-exported without much intervention
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and an unstable fiscal regime and with a view to attract larger FDI in India. with the minimum possible regulations. Although labour standards. A close examination of the evolution of SEZs in countries with similar economies as India eg. a comprehensive analysis on these aspects is scarce in the Indian context. in order to curb the SEZ bottlenecks faced by India today. generate employment.75.zenithresearch. These favourable conditions resulted in the biggest ever corporate rush for the development of SEZs in India. China.452 individuals in SEZs by December 2009. UAE and Jordan. reviewed them occasionally and also ensured that ample facilities are provided to the SEZ developers as well as the companies setting up units in SEZs.53. Iran. touching on almost every possible aspect of SEZs. both at the Centre and the State level.561 crore (USD 13274 million) and an additional job creation for 15. In the global economy.org. ISSN 2231 5780 from customs authorities. Therefore. With a view to overcome the shortcomings experienced on account of the multiplicity of controls and clearances. This is a relatively underresearched theme. Over 234 companies received formal approval. They have formulated policies. 162 companies received in-principle approval and 100 companies received notification to set up SEZs. namely the human development effects of SEZs. The Indian government is expecting an investment to the tune of Rs. absence of world-class infrastructure. most developing countries are witnessing a shift away from an import substitution based development strategy to one based on export promotion policy. November 2011.1 Issue 7. The number of Special Economic Zones (SEZs) globally continues to expand. this paper aims to examine impact of Special Economic Zone (SEZ) on human development and poverty reduction in India. attractive fiscal package. labour relations and employment effects have been the most critical and controversial elements of SEZs. This policy intended to make SEZs an engine for economic growth supported by quality infrastructure. As 178 www. SEZs account for an increasing share of international trade flows and employ a growing number of workers world-wide. 1. Only when the goods are moved to consumers in the rest of the country. EPZs are viewed as an important if a second best policy instrument to promote industrialisation. will help us to understand their success stories and thereby implement those factors. Special Economic Zones (SEZs) were established in many countries as testing grounds for implementation of liberal market economy principles.in . In India. the government has been proactive in the development of SEZs. Therefore. SEZs are viewed as instruments enhancing the acceptability and credibility of transformation policies. The present study has focused on one aspect of this debate. Globally.2 SPECIAL ECONOMIC ZONE (SEZ): A REVIEW In this era of globalization. do they become subject to the prevailing customs duties. the Special Economic Zones (SEZs) Policy was announced in April 2000. many countries initiated Free Trade Agreements (FTAs) which eventually led to a spurt in investments in infrastructure developments for Free Trade Zones (FTZs) and SEZs. attracting domestic and foreign investment and also for the opening up of the economy. The Shenzhen SEZ in China is a perfect example of a SEZ success story. However. costs and benefits of SEZs have generated an intense debate. whether SEZs are beneficial for development remains a subject of controversy. and for regional development. generate employment as well as mobilise foreign exchange.ZENITH International Journal of Multidisciplinary Research Vol. SEZs in India seek to promote the value addition component in exports.

empirical evidence is ambiguous. Second. This. have not subsided. Review of existing studies however suggests that a comprehensive analysis of EPZs‟ labour related effects is scarce. the first known instance of an SEZ seems to have been an industrial park set up in Puerto Rico in 1947 to attract investment from the US mainland. human rights. In India. impinges on the benefits that they yield. One group of studies (ILO 1998. health. very few studies evaluate the labour effects of EPZs in comparison with domestic industries (Kusago and Tzannatos 1998). Mazumdar 2001. and Kemal 2001. however. seven more zones had come into existence. technology transfers. Hossain 2001. November 2011. India experimented with the concept of Export Processing Zones (EPZ). One of the most controversial aspects of EPZs is their impact on labour standards. different studies come to different conclusions even where their analysis pertains to the same country. ISSN 2231 5780 part of their policy instruments to promote exports. From 1965 onwards. among others) shows that zones are targetoriented workplaces where virtually all indicators of sustainable human development including labour standards. Ireland and Taiwan followed suit. the new Export and Import Policy allowed for SEZs to be set up in the 179 www. EPZs are seen as a key instrument not only for promoting exports and earning foreign exchange but also for stimulating economic growth through additional investment. Thus. A significant body of literature now exists addressing the concerns about human development effects of these zones. Most of the available studies are narrow in scope and are based on case studies instead of broad surveys. Third. which was introduced way back in 1965 when the first zone was set up in Kandla. however.1 Issue 7. in the absence of a comprehensive framework within which different aspects of human development effects are woven together. By the late 1990s. labour relations and human development. The SEZ scheme introduced by the government of India in April 2000 has its genesis in the Export Processing Zone (EPZ) scheme. all the existing EPZs were converted into SEZs. zones are not a static phenomenon. These did not quite deliver as much as was expected. and employment generation. and safety and the environment are ignored. The economic conditions in which they operate change over time and affect their characteristics (or competitive attributes). Another group of studies argues that EPZs can be instrumental in promoting human development (ILO/ UNCTC 1988. they are called „special economic zones‟ (SEZs). labour laws. Gains from EPZs would thus depend on the stage of their evolution and would vary across countries as also within countries across zones and time. However.3 GENESIS AND FEATURES OF AN INDIAN SEZ Worldwide. There were 176 such zones across 47 countries in 1986. PRIA 2000. As a result. Under the new scheme. Despite the current hype over EPZs in developing countries.zenithresearch.org. 1.in . Basile and Germidis 1984. the analysis is often supported by patchy evidence. some effects are over emphasized while others are neglected. but in the 1980s China made the SEZs gain global currency with its largest SEZ being the metropolis of Shenzhen. few academic studies are available on labour effects of zones in India. Finally. in 2000. Fourth. A majority of new zones have taken root in developing countries. In 2003 the number of zones increased to over 3000 across 116 countries (ILO 2003). many of these countries are vigorously promoting export processing zones (EPZs). controversies regarding the beneficial effects of EPZs onto the economy that have been raging for more than four decades now. ICFTU 2004. in turn.ZENITH International Journal of Multidisciplinary Research Vol. There are several limitations of the existing literature: First. Willmore 1995). In the 1960s.

which were later – in 2005 – legally deemed as SEZs under the new Act. consumables. from the domestic market. Exemption from customs duties on the import of capital goods. spares. etc. Facilities in the SEZ may retain 100 per cent foreign-exchange receipts in Exchange Earners‟ Foreign Currency Accounts. etc. No import licence requirements. No routine examinations by Customs for export and import cargo. the Indian SEZ policy provides for development of these zones in the government. More than 300 SEZs have obtained either formal or “in principle” approval over the years. except for activities included in the negative list. November 2011. Sales by SEZ units in the domestic tariff area are subject to payment of full custom duty and to the import policy in force. a total of 19 SEZs were established prior to the promulgation of the SEZ Act. raw materials. All the import/export operations of the SEZ units are on a self-certification basis. Eight EPZs were converted into SEZs. Furthermore. The salient features of the Indian SEZ initiative further include the following points: Unlike most of the international instances where zones are primarily developed by governments. raw materials. This is meant to offer equal opportunities to both Indian and international private developers. Exemption from Central Excise duties on procurement of capital goods. while goods coming from the SEZ into a DTA are treated as imports. No cap on foreign investment for small-scale-sector reserved items which are otherwise restricted. Goods flowing into the SEZ area from a domestic tariff area (DTA) are treated as exports. ISSN 2231 5780 public. Altogether. private or joint sector. private or joint sector or by state governments. and consumable spares.ZENITH International Journal of Multidisciplinary Research Vol. Exemption from industrial licensing requirements for items reserved for the small-scaleindustries sector.1 Issue 7.in .zenithresearch. 100 per cent FDI is permitted for all investments in SEZs. 180 www. Units may be set up in SEZs for manufacturing goods and rendering services. SEZ units are required to be positive net foreign-exchange earners and are not subject to any minimum value addition norms or export obligations. SEZs have been enabled with a view to providing an internationally competitive and hassle-free environment for exports. 100 per cent FDI is permitted for SEZ franchisees in providing basic telephone services in SEZs. offshore banking units may be set up in the SEZs.org.

friendly policy. 2005. etc. Economy.in . Home Affairs. 181 www. Exemption from Central Sales Tax and Service Tax.org. health-care and recreational facilities permitted on a case-by-case basis. In addition to the duty exemptions. It comprises various joint secretaries and other officials from several ministries. hotels. such as the Ministries of Commerce. the government enacted the SEZ Act. and where (2) goods and services going into an SEZ from a domestic tariff area (DTA) shall be treated as exports. Since the SEZ Act of 2005 was put into force. according to which (1) SEZs are duty-free enclaves within the territory of India. 8 SEZ Act). and (3) the SEZs may be set up for the manufacture of goods or rendering of services. The Board of Approval was constituted by the Central Government in exercise of the powers conferred under the SEZ Act.1 of the Foreign Trade Policy. the SEZ Act is advertised by the Indian government as a single window clearance mechanism in which the responsibility for promoting and ensuring the orderly development of the SEZ is assigned to the Board of Approval (BoA). The state governments followed suit and also enacted their own SEZ laws to mainly cover state subjects. Besides providing state-of-the-art infrastructure and access to a large. Defence. At least 50 per cent of the area of multi-product or sector-specific SEZs must be used for export purposes. Furthermore. SEZ developers also enjoy a 10-year “tax holiday”. the units in the Indian SEZs do not have to pay any income tax for the first five years and only pay half their tax liability for the next two. educational institutions. 7.zenithresearch. operation and maintenance of SEZs. well-trained and skilled workforce. Science and Technology. The rest can include malls. external SEZ suppliers and residents. 1. Profits allowed to be repatriated without any dividend-balancing requirement. these policies have been outlined there. November 2011. All the decisions are taken in the Board of Approval by consensus. The SEZ legal framework intends to provide a comprehensive tool to satisfy the requirements of all principal stakeholders in the SEZ: the developer and operator. occupying enterprises. The Board of Approval has 19 members (sec. The incentives for developers of SEZs include: Exemption from duties on import/procurement of goods for the development. educational. the foreign economic policy was formulated in para. Exemption from Service Tax FDI to develop townships within SEZs with residential.1 Issue 7. which became operative in February 2006 together with the SEZ Rules. The size of an SEZ varies depending on the nature of the SEZ. ISSN 2231 5780 Facility to realize and repatriate export proceeds within 12 months. the SEZ policy also provides enterprises and developers with a favourable and attractive range of incentives.4 SPECIAL ECONOMIC ZONE (SPZ): A LEGAL FRAMEWORK For a long time. As the Indian government wanted to give a significant thrust to its professed investor.ZENITH International Journal of Multidisciplinary Research Vol. Income tax exemption for a block of 10 years in 15 years. while goods coming from the SEZ area into the DTA shall be treated as if these are imported.

might increase demand for skilled labour also. we identify three channels through which SEZs may affect human capabilities • Employment effects • Human capital formation effects • Technology upgrading effects 1. 1. and transport. a significant source of new employment. Law. This stimulates the local construction industry giving employment to unskilled labour. Urban Development and Finance as well as that of a nominee of the state government concerned. Thus. 1. in turn. which tolerates the minority coalition government led by the Indian National Congress. developing countries generally attract investment into simple processing labour intensive industries. a priori. improves the quality of life of labour and enhances their productivity.1 Issue 7. communication.5.in .zenithresearch. Overseas Affairs. 182 www. Due to the availability of labour at low wages. Shift towards higher value added activities as SEZs grow. These. Earlier on. which is expected to have a substantial impact on employment generation. there has been increasing demand for various support services such as. so as to safeguard the support of the left-wing parties in the Indian Parliament. two. hotels and restaurants. November 2011. Demand for utilities such as water. Finally. they generate employment for women workers. Sivalingam (1994) reports that in cities surrounding the Malaysian SEZs. This increases the demand for unskilled labour within the zone. SEZs generate direct employment for skilled and unskilled labour . a professor at the Indian Institute of Management or the Indian Institute of Foreign Trade.1 EMPLOYMENT EFFECTS The employment effect of SEZs operates through three channels : one.org. the Central Government wanted to dispense with the right of the states to have a say in the approval procedure.5. creates non pecuniary benefits. electricity. enterprises in SEZs constitute.ZENITH International Journal of Multidisciplinary Research Vol. SEZs also generate employment for unskilled labour by creating demand for physical infrastructure within the zone. this Central Government institution is the major authority for applications and approvals regarding the establishment of SEZs. there is even labour shortage in this industry. and three.5 IMPACT OF SPECIAL ECONOMIC ZONE (SEZ) ON HUMAN DEVELOPMENT AND POVERTY REDUCTION: A THEORITICAL FRAME WORK The existing SEZ literature. they also generate indirect employment. had to be revoked.1. on the pressure of the states.1 DIRECT EMPLOYMENT GENERATION In so far as SEZs comprise labour-intensive activities. and administration also rises. It is believed that employment creation generates incomes. This predictably. ISSN 2231 5780 Environment. have poverty reduction effect.

However.ZENITH International Journal of Multidisciplinary Research Vol. SEZs provide foreign exchange earnings that slacken the foreign exchange constraints of the rest of the economy regarding the import needs of the rest of the economy and accelerate investment activities. thus generated for both unskilled and skilled labour.zenithresearch. which depends crucially on wages and working conditions. a priori that employment in SEZs enhances human development. and insurance. shipping. hospitality. Employment opportunities are. ISSN 2231 5780 1. Employers often pay scant regard to labour laws. bans on collective bargaining and the right to strike. education. One. Besides. Two. there are three other channels through which SEZs generate a favourable impact on employment generation. 1. communication.5.5. which facilitate generation of economic activities and employment. These include. SEZs thus generate development funds. The literature is replete with studies on this www. once additional incomes are generated. Women workers are considered more disciplined and hard working.1 Issue 7. employment regulations. and health and safety norms at work. The implicit assumption is that job creation alleviates unemployment. SEZs are thus expected to contribute substantially to the empowerment of women (Madani 1999). It is found that employers prefer female workers to male workers in the belief that manual dexterity. tourism. they also generate economic activity outside the zone due to the transformation of investment funds into fixed assets and purchase of inputs and services from the rest of the economy. health and transport. it cannot be assumed.org.1. In addition to the above.in 183 . single and come from rural and poor backgrounds. in particular FDI. There are restrictions on the right to join a trade union. packaging. The above theoretical propositions suggest that zones contribute to human development by increasing employment opportunities. governments of host countries eliminate labour standards. This in turn has multiplier effects on income and employment. consequently promoting labour exploitation and depletion of human capital. automobile. But for SEZs they might not have been absorbed into formal employment at all and hence SEZ employment can be said to afford them an independent source of income that would otherwise have been denied. there is an increase in demand for various goods and services such as housing.2 EMPLOYMENT FOR WOMEN Evidence suggests that women‟s share to total employment in SEZs is substantially higher than both the economy as a whole as well as the manufacturing sector outside the SEZs (Kusago and Tzannatos 1998). banking.2 INDIRECT EMPLOYMENT GENERATION The indirect effect is manifested as ancillary employment opportunities generated in sectors of the economy affected by the operations of the SEZ. generates income. transport. greater discipline and patience make women more suitable for the unskilled and semi-skilled activities carried out in the zones. Majority of women are young. improves standard of living. civil aviation. they are less likely to exert pressure for high wages and better working conditions. Three. November 2011. It is generally claimed that in order to attract investment. and results in human development and poverty reduction.

SEZs offer a highly conducive investment climate to attract FDI by making up for infrastructural deficiencies and procedural complexities that characterize developing countries. These issues are critical in determining employment effects of zones on living standards. Through such linkages SEZs may enable firms in the rest of the economy to master production. and other skills (such as marketing and distribution). Zone units may also be setting up training institutes to impart training to the labour to create the relevant pool of skilled labour. higher management training. ambiguous. This might increase the welfare of poor unskilled workers by increasing the range of job opportunities available to them. FDI brings with it technology transfer. ISSN 2231 5780 issue the findings of which are. and advanced technician training.ZENITH International Journal of Multidisciplinary Research Vol. In the longterm.5. Rhee and Balot 1990.and off the job. more often. the creation of a macro environment in which returns to education and skill development are high.1 Issue 7. is an important component of the skill formation effect of SEZs. managerial. institutes are established to improve technical and vocational skills of workers in the zone. SEZs can thus play a crucial role in upgrading domestic entrepreneurial skills. distribution and marketing skills important for enhancing international competitiveness. poverty reduction. These programmes aim at providing technical education at the factory rather than at the institution. Given the high labour turnover rate in the SEZs. and Johansson 1994). and human development and need to be analysed in detail before drawing any conclusion regarding the impact of zones on human development and poverty reduction. 184 www. The export knowledge of foreign firms operating in SEZs is expected to spill-over to domestic firms in SEZs and then to those in the domestic economy.zenithresearch. Typically. In the Shenzhen SEZ (China). 1. Finally. which in turn provides positive incentives for educational attainment and skill formation. The second method involves upgrading of the education system to cater to the needs of the zone units. access to markets and training for staff. In Taiwan. Zone units can thus directly affect the skill formation as workers are provided additional training on. November 2011. Zone units raise the demand for and wages of skilled workers through technology transfer and capital investment. One is the firm level activity whereby the host country labour force acquires skills from within the firm through training and learning by doing on the job (Kusago and Tzannatos 1998). Training may spread broader than enterprise programmes. technical and marketing know-how can allow organizations to profitably enter world markets (Hoffman 1991.org. however. Local employees of multinational corporations (MNCs) in some cases are sent to their headquarters abroad or elsewhere for middle and. some cooperative training programmes between schools/colleges and the enterprises in the SEZs are being developed. Skill formation for the poor unskilled workers also occurs through assimilation of industrial discipline.3 SKILL FORMATION (HUMAN CAPITAL FORMATION) EFFECTS There are various modes by which SEZs can positively contribute to human capital formation.in . domestic firms can benefit from this training by hiring workers previously employed in the zone firms. Improved skills and productivity increase workers‟ income earning capacity. Foreign entrepreneurs may set an important example for potential domestic entrepreneurs by demonstrating that the right combination managerial. Sri Lankan SEZs and Mexican maquiladoras.

In contrast. Two distinct types of value chains are identified: those that are producer-driven and others that are buyer-driven (Gereffi et al. these firms transfer into „original brand name manufacturing‟ (OBM). ISSN 2231 5780 1. They provide technology to the networked producers. Direct transaction of technology and indirect spill-over through various channels such as copying. The former type characterizes those value chains in which multinational enterprises (MNEs) outsource the production of components and play the central role in controlling the system. But they also narrow the technology gap between the foreign and domestic firms indirectly by promoting spill-over within the zone and then outside the zone. Direct impact in each case may be empirically analysed but indirect effects. This arrangement is common in capital. computers and electronics. managerial. 2005). the latter type refers to primarily low-tech labour intensive industries in which large retailers. Learning and knowledge created in SEZs is eventually transmitted to domestic firms supplying to the SEZ firms through backward linkages when the companies within the SEZ buy inputs from the host country. the skill formation effect operates directly when workers are given specific training by the firms or when they acquire skills by working in the zone units. In this case MNEs are marketers of products only. Participation in these chains allows producers to upgrade themselves technologically on continuous basis (Heron 2004). networked producers need to arrange for raw materials and technology themselves. Each of them exerts two types of effects: direct and indirect. which operate through backward and www.in 185 . Thus. trade bodies. Similarly. and advances in technology raise challenges for the SEZ units competing in global value chains. Global standards. For instance.1 Issue 7. SEZs are not enclaves/foreign territories that are functioning in isolation. low-cost competition. and marketing networks in the zones.and technology-intensive industries such as automobiles. The indirect channel becomes operative when the spillovers take place through movement of workers to domestic areas.5. The above analysis suggests that SEZs impact on human development through three broad channels: employment generation. But having established a range of technological skills through learning.4 TECHNOLOGY UPGRADING EFFECTS SEZs attract export-oriented FDI and promote other forms of collaboration between local firms and MNCs. many local firms become responsible for original equipment manufacturing (OEM) wherein they source raw materials locally and manufacture products to the specifications of foreign buyers. Finally. The demand for complementary goods and services generates indirect employment. branded marketers. manufacturers‟ associations and export marketing bodies which provide a useful platform to interact and to foster closer rapport among members act as valuable forums for information sharing and spillovers. This stimulates learning and innovation which are crucial aspects of human development. For instance. SEZs facilitate the insertion of domestic SMEs (small and medium enterprises) into global value chains by offering them an enabling investment climate (Gereffi 2005). reverse engineering.org. November 2011.ZENITH International Journal of Multidisciplinary Research Vol. typically located in the „Third World‟. as many believe. and movement of workers and managers between foreign and domestic companies also facilitate transmission of knowledge to the rest of the economy. skill (human capital) formation and technology upgradation. Further. foreign collaborations are a direct source of new technology.zenithresearch. For instance. and trading companies play the pivotal role in setting up decentralized production networks in a variety of exporting companies. employment is generated directly when zone units and administration hire labour.

. This paper focuses primarily on the direct effects of SEZs.org. they have contributed significantly to employment generation at the regional level. The zones thus could not fulfill the role of promoting innovation systems in the economy.69. 186 www. „Export processing zones in Sri Lanka: Economic impact and social issues‟. ILO. which leaves little scope for R&D activities. The role of SEZs in human capital formation appears to be relatively limited. if promoted vigorously can therefore act as an initiator in the process of human development and poverty alleviation in India.zenithresearch. Zones have proven to be particularly beneficial to female employment. SEZs. They can only be assessed by analysing the extent of such linkages. J. Much of this will be a net addition to employment as investment relocation/diversion in export oriented production is likely to be limited. has thus far been the most important channel. REFERENCES 1. there has been a surge in the establishment of new zones. November 2011.1 Issue 7. Poverty reduction thus calls for the creation of remunerative. Most critics suggest that employment is feminized in the zones and that these women are young and can easily be exploited. It can only be reversed if fresh investment is attracted to SEZs. Zones are dominated by medium tech activities and most firms are involved in contract manufacturing. However. regular and good-quality jobs in the labour market. Skill begets skill through a skill multiplier process and ensures higher returns. technologies and innovations through technology transfers and technology creation has however been quite limited till now. both direct and indirect. employer-driven and lasts for short durations. The learning helps in upgrading their capability of learning further. But training is focused. thereby increasing their employability as well as improving their position in the household. Most SEZ units impart on-the-job training to their workers. Due to stagnation. Geneva. their ability to absorb surplus labor has been declining. Abeywardene. SEZs have opened up opportunities for wage employment for women in the formal sector. through which SEZs have impacted on human development and poverty reduction in India. ISSN 2231 5780 forward linkages are difficult to measure. the relationship between poverty and employment lies in the extent to which income generated from employment permits workers and their dependants to obtain goods and services necessary to meet minimum needs.ZENITH International Journal of Multidisciplinary Research Vol. „Value addition‟ component and hence employment generation potential of zones is rather large. With the SEZ Act in place. R. Even though their contribution to national employment has been rather limited. CONCLUSION AND POLICY IMPLICATIONS In could be concluded that the Employment generation.in . India‟s SEZs are not dominated by assembly type operations. This is an important contribution of zones because female employment is crucial for equitable growth. which is likely to generate huge employment potential in the economy. Multinational Enterprises Programme No. This is despite the fact that the knowledge spill-over potential of zones is rather high in the economy. Zones‟ contribution as an engine for promoting new knowledge. et al (1994). This is manifested in the declining employment elasticity of exports. It is found that the technology-related activities of the SEZ units are not different from those of the export oriented domestic units outside SEZs.

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