Abstract 

In 2018, the United States (US) took India to the World Trade Organization’s (WTO) Dispute Settlement Body over a number of subsidies given by India, including those given under the special economic zone (SEZ) policy. On October 31, 2019, India lost the case in the WTO and the Dispute Panel agreed that the subsidies given by India to the SEZs are prohibited subsidies under the provisions of the WTO's Agreement on Subsidies & Countervailing Measures (SCM). As a consequence, the Department of Commerce, Ministry of Commerce and Industry, has engaged in extensive consultation with multiple stakeholders to redraft the policy.

Existing studies shows that, unlike countries such as China and Vietnam, India has not been able to use its SEZ policy to (a) move up the value chain into high-value manufacturing (b) increase exports (c) attract greater FDI, and (d) integrate into the global value chains. In this context, the objective of this article is to examine India’s SEZ policy with respect to the WTO requirements, the policy gaps and other issues faced by the developers and units. It draws lessons for India from the experiences of select countries, which have been successful in making their SEZ policies WTO compliant. It also makes recommendations on how to make the SEZ policy more effective so that (a) SEZs can be a key driver of India’s economic growth and development and (b) it contributes to enhancing exports and value chain integration. The article is based on secondary data and information analysis and in-depth meetings with 25 stakeholders.

This paper will be part of the upcoming TDM Special Issue on "The Interaction Between International Investment Law and Special Economic Zones (SEZs)". More information here www.transnational-dispute-management.com/news.asp?key=1771