Locational Rationale of Special Economic Zones

Abstract

The selection of site of an industrial unit or a unit in a special economic zone is largely affected in a developing country like India by government intervention. This paper examines how far the governmental promotion of Special Economic Zones in a developing economy like India has been the guiding factor for small and medium industrial units in cluster. For finding the results, an examination of locational theories, following with the development of SEZ in India is done. Further, an analysis of geographical and product pattern of SEZ unit of India and relationship between level of industrialization and the SEZ pattern, and the pre-and post SEZ industrial pattern has been done. The findings of the above stated analysis results in high correlation among the state level development, industrialization and the number of SEZ units in these states. Research also finds the shift in change of industrial focus by the Indian states due to governmental interventions. This is concluded by the examination of change in industrial base in post SEZ phase from pre SEZ phase. Thus, in developing countries like India, attitude of government in its rules and regulations for trade policies play a very important role in decision-making of an entrepreneur about the choice of location for setting up a business unit.