Q1. Discuss the significance of the recent relaxation in SEZ Rules, 2006 in promoting India’s semiconductor and electronics manufacturing sectors. (10 marks)

✅ Answer Framework:

Introduction

• Define SEZs as designated zones with economic incentives aimed at boosting exports and manufacturing.

• Mention recent government steps to relax SEZ Rules for the semiconductor and electronics sectors.

Body

🔹 Original SEZ Rules, 2006 – Key Features

• 50-hectare minimum land requirement

• Export-oriented focus

• Encumbrance-free land clause

• Tax incentives and deemed foreign territory status

🔹 Recent Relaxations (2024-25)

• Land size reduced to 10 hectares for semiconductor/electronic SEZs

• Land need not be fully encumbrance-free

• Domestic supply permitted with duties

🔹 Significance for Semiconductor Sector

• Attracts investment from global players (e.g., Micron SEZ in Gujarat)

• Supports India’s goal under the Semicon India Programme

• Builds end-to-end chip design and manufacturing capacity

🔹 Significance for Electronics Manufacturing

• Enables scale and efficiency for exports and domestic market

• Facilitates growth of clusters like Aequs SEZ in Karnataka

Conclusion

• The relaxations make SEZs more flexible and competitive, aligning policy with India’s strategic goals of self-reliance and integration into global value chains.

Q2. Critically examine the role of SEZs in promoting India’s export-led industrialisation strategy. Do the recent reforms address the challenges faced by SEZs? (15 marks)

✅ Answer Framework:

Introduction

• Define SEZs and their role in export-led growth.

• Highlight India’s SEZ journey since 2005 Act.

Body

🔹 Achievements of SEZs

• Boost to exports (especially IT, pharma, textiles)

• Attracted FDI and generated employment

• Simplified regulatory and customs procedures

🔹 Challenges Faced by SEZs

• Underutilization of land and infrastructure

• Rigid land norms (50-hectare rule)

• Restrictions on domestic sales

• Unviable locations and poor connectivity

• Global changes in WTO norms on subsidies

🔹 Recent Reforms (2024)

• Land requirement reduced for semiconductor SEZs

• Encumbrance-free clause relaxed

• Domestic supply allowed with duties

🔹 Impact of Reforms

• Makes SEZs more attractive for high-tech industries

• Encourages investment in strategic sectors (e.g., electronics)

• Addresses long-standing issues of land flexibility and market access

🔹 Remaining Issues

• Lack of a clear exit policy

• Policy uncertainty on grandfathering of benefits

• Global trade compliance (WTO rules)

Conclusion

• SEZs remain a key pillar for industrial policy.

• Recent reforms are a step in the right direction, but holistic revamp needed to sustain their relevance and effectiveness.

Q3. India aims to become a global hub for semiconductor manufacturing. In this context, evaluate the role of SEZ policy reforms in achieving this ambition. (10 marks)

✅ Answer Framework:

Introduction

• Highlight India’s ambition under the Semicon India Programme.

• Mention the global semiconductor shortage and the need for self-reliance.

Body

🔹 Challenges for Semiconductor Manufacturing in India

• Capital intensive and technologically complex

• Long gestation periods

• Inadequate ecosystem (skilled labor, supply chains)

🔹 How SEZ Reforms Support This Ambition

• Land norm reduced to 10 hectares → Eases entry

• Legal land encumbrance clause relaxed → Faster project initiation

• Domestic supply allowed → Assures demand and backward integration

• Financial incentives + tax benefits continue under SEZ umbrella

🔹 Examples

• Micron SEZ in Sanand, Gujarat → ₹13,000 crore investment

• Creation of chip manufacturing ecosystem and jobs

🔹 Broader Policy Synergy

• PLI Scheme for semiconductors

• Infrastructure development (logistics, power, water)

• Skilling initiatives for VLSI and chip design

Conclusion

• SEZ reforms provide a foundational policy push to semiconductor manufacturing, but success depends on execution, global partnerships, and ecosystem development.