Export Processing zones in India

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Figure 5 : Trends in Exports, imports and net foreign exchange earnings million in 2001 but then declined slightly to Rs. 43194 million in 2002. One must however observe that while the value of net foreign exchange in absolute terms increased phenomenally after the mid 1980s, the rate at which it grew remained stagnated and in fact started declining after 1998 (Figure 6). Rs Million 12000 10000 8000 6000 4000 2000 0 year 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 exports impf NFE Figure 6 : Trends in the growth rate of net foreign exchange earnings : 1986-2002 Foreign Exchange Growth Rate in % 50.00 40.00 30.00 20.00 10.00 0.00 FE Year 1987 1989 1991 1993 1995 1997 1999 2001 Source : Ministry of Commerce One must also observe that the value addition which is defined as a ratio of the net foreign exchange to exports did not show any perceptible increase either over the four phases of the evolution of the EPZ policy. 18
Figure 7 : Trends and value addition and its growth rate : 1974-2002 Growth Rate in % 100 50 0 -50 -100 -150 -200 year 1967 1969 MAVA 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 MAVAGR In an earlier study, Amirahmadi and Wu (1995) found that many of the Asian countries generated large amounts of gross exports but their net export earnings had neither been consistent nor impressive. Some countries however managed impressive rates of value addition. These include Indonesia, South Korea and Taiwan. These countries managed a ratio of 49 % to 63% (Madani 1999). In Philipines also, the ratio was 42% in 1994. In India, value addition on an average had been 38% for the entire period. During the late 1990s, it had been over 50%. Though it declined to 44% in 2002, this compared favourably with many Asian countries. This suggests that EPZs in India do exhibit the potential of earning foreign exchange but due to poor export performance, their contribution to the economy has been insignificant. IV. 5 Export performance of EPZs : by Sector Figure 8 provides a view of the sectoral patterns of EPZ exports. In the mid 1980s, engineering sector accounted for the largest share of exports followed by drugs, electronics and textiles in that order. By the late 1980s, the share of engineering goods started declining. It has been around 5% since the late 1990s. The share of drugs also started declining in 1989 and fell from over 25% in the mid 1980s to around 5% by 1991. Decline in textile had been slow but steady. It declined from 15% in 1984 steadily to about 7% in 2002. In contrast, exports of gems and jewellery rose rapidly. In 2002, they accounted for 42% of the total EPZ exports. Electronics exports also grew faster than the overall zone exports. As a consequence, their share almost doubled from 20% in 1984 to 40% in 1997. Thereafter , it fluctuated and in 2002 stood at 33%. Exports of other products, including leather products did not show any perceptible rise. Currently, only two sectors, electronics and gems and jewellery account for three fourths of the total zone exports. In the electronics sector, over 50% of total exports are currently accounted for by software. 19
Page 1 and 2: WORKING PAPER NO. 148 EXPORT PROCES
Page 3 and 4: Contents FOREWORD..................
Page 5 and 6: I. Introduction ∗ The prevailing
Page 7 and 8: It also documents the trends and pa
Page 9 and 10: investment climate in 43 countries
Page 11 and 12: Several measures have been adopted
Page 13 and 14: IV. Export performance of EPZs/ SEZ
Page 15 and 16: clearer picture, we plotted the tim
Page 17 and 18: A part of this slowdown in export g
Page 19 and 20: The obvious question now is: Was th
Page 21: competitiveness. Several policy mea
Page 25 and 26: Figure 8: Performance of EPZs by se
Page 27 and 28: similar tax laws have been structur
Page 29 and 30: Table 10 : Exemptions from the stat
Page 31 and 32: Table 12 : Provision of Basic infra
Page 33 and 34: Table 13a : Quality of infrastructu
Page 35 and 36: Table 15 : Quality of governance :
Page 37 and 38: companies outside the zone reported
Page 39 and 40: Table 20: How constraining are the
Page 41 and 42: may not be possible to provide such
Page 43 and 44: VII Conclusion The EPZ policy in In
Page 45: Mihir A. Desai, C. Fritz Foley, Jam

Export Processing zones in India

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