in 2007, the aim to attract a billion dollars of investment and create 20,000 jobs in a "Fashion Village", seemed reasonable. Dupont was interested, commercial director AK Jain said.
"We started the Fashion Village apparel SEZ thinking it would become a mini-Italy," said Jain. Orient Craft had the land designated as an SEZ, built a 13-km boundary wall and a warehouse, laid concrete roads and planted trees. In all, it invested more than $30 million.
What happened next helps illustrate the missteps of a government that businesses say translates into lost opportunity and wasted capital.
Backed by a 10-year tax holiday, exports from the zones soared 13 times over six years to reach $66 billion in 2010/11, about 17 percent of India's $384 billion of exports that year.
But in 2011, the government slapped an 18.5% minimum acceptance tax (MAT) on future profits — in effect, killing the goose that laid the golden eggs, exporters said.
The rapid exports growth from SEZs slowed to a crawl. New investment tailed off, data from polling group Ipsos shows.
Orient Craft threw in the towel two weeks ago, surrendering its SEZ license. It was not alone: just 173 of 576 approved SEZs are operating today. Close to 60 developers, including Reliance Industries, a major exporter, have given up licenses.
In February, an Ipsos survey of 400 companies operating in SEZs found 62 percent of respondents had suspended plans to invest further in the zones, while 75 percent thought the tax hurt India's reputation.
Jain said the zones were now economically unviable for manufacturers, strong words from someone who is deputy chairman of an industry chamber promoting exports from SEZs. "No promoter will ever think or advise the next generation to invest in SEZs or any such project for many years," Jain said.
Exporters that do not depend so much on imports are benefitting from the weak rupee. That includes Orient Craft; its 15 factories in the Delhi area have the fullest order book in years.
Textiles and pharmaceuticals, which exported $33 billion and $15 billion respectively in 2011/12, are set for a boost. Service industries, including IT outsourcing, which account for around