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Zones are popular instruments in developing countries for pursuing export-led growth strategies. Developing countries have built zones as models for selective policy applications and for easier integration into the world economy. India is not an exception. However, the recent Special Economic Zones (SEZs) that have come up following the SEZ Act of 2005 have created several controversies. These include concerns over accentuation of economic divides and industrial relocation. This article examines the rationale behind zone-based growth strategies and studies the international evidence on zones. It also looks closely at India’s earlier and current experience with zones. It finds that India’s new SEZs are following specific locational patterns on account of discriminatory incentive structures that are also inducing distinct product-orientations in these zones.

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