SEZs - Why should India benchmark the Chinese development policies?

The so-called communists say that rather than promote prosperity, SEZs in India will create economic hardship as they would be built on fertile agricultural land, without adequate compensation for farmers and consumers. They lay the right emphasis on Indian farmers' interests, arguing for more compensation. And remember, the area of arable land per capita in China and India is just 0.10 and 0.17 hectares, respectively, compared with 0.31 in the rest of the world. Food Production, Climate Change, etc. are also at stake. True, the government must safeguard the interests of the farmers at all costs. Again the Indian Finance Minister had said publicly that he fears that the government can stand to lose tax revenue because of the special concessions given to firms that will operate in the SEZs. The rules are obviously unclear and they should have been finalized before granting approval in-principle to any SEZ project.

Recently, the South Korean steel company POSCO has got approval for it's multi billion dollar plan to set up a SEZ in Orissa. The commerce minister argues that new economic activity generated by SEZs can compensate the government for revenue lost from tax breaks. Many prefer to do a comparision with China and forget the fact that unlike India, China do not have the luxury of higher per capita arable lands, and is establishing SEZs out of economic necessity. And unlike China, Indian SEZs are clustured and scattered, mostly around industrialised cities like Delhi and Mumbai - making things either very good or very bad. What about rest of India? Moreover, such unclear policies can be misused for real estate development rather than for generating exports or creating new jobs. Many state and local authorities are under attack for brokering land acquisition deals that benefit real estate developers rather than farmers. There is not a secret, farmers will suffer! The guidelines relating to the acquisition of fertile farm-land and on the space allowed within SEZs for the construction of housing, shopping malls and recreational outlets should be much more transparent, otherwise it can only become the largest land grabbing movement in the history of modern India.

As people in real estate are often impressed by shows of affluence: a self-confident person with a beautiful car who is selling a product that seems too complicated to understand and too good to be true. In the hindsight, most people know that the best way to avoid getting taken by such schemes is to use common sense, but it often gets forgotten. Whether you are a policy maker, investor or a small farmer, you should avoid investment deals that are overwhelmingly complex and offer outrageous returns. For success, SEZs should focus exports, employment and investment, instead of land area and policy-makers should avoid trying to create a Chinese replica - it's not possible in India. Given the fact that so much money got poured into real estate in India over the last few years, it seems an obvious market in which fraudsters would play - especially considering the volume of activity. An SEZ mishap will not only hurt property owners or farmers it will also hit insurers, banks and mortgage lenders. (also refer a previous article titled Real Estate Scams).