Promoting agglomeration economies and industrial clustering through SEZs: Evidence from India

This paper argues that traditional theoretical approaches to SEZs are unable to adequately explain the rationale and economic contribution of SEZs in India and proposes an alternative approach based on the economics of agglomeration, in general, and industrial clustering, in particular. It argues that although SEZs are not treated as clusters in the SEZ literature, they share characteristics with the latter. It uses the proposed approach to evaluate the role of SEZs in promoting cluster-based industrialisation and entrepreneurship in the country. The analysis presented in the paper is based on observations during field visits to selected operational SEZs across nine states and in-depth interviews with bureaucrats, developers, entrepreneurs and employees.