UPSC Prelims 2010 Q18: Indian Economy – International Trade & WTO
The SEZ Act, 2005 which came into effect in February 2006 has certain objectives. In this
context, consider the following :
1. Development of infrastructure facilities.
2. Promotion of investment from foreign sources.
3. Promotion of exports of services only.
Which of the above are the objectives of this Act ?
- (a) 1 and 2 only
- (b) 3 only
- (c) 2 and 3 only
- (d) 1, 2 and 3
Answer: (a) 1 and 2 only
Explanation
Objectives of the SEZ Act, 2005
The Special Economic Zones (SEZ) Act, 2005 was designed with specific, broad economic goals.
| Objective | Verdict | Reason |
|---|---|---|
| 1. Development of infrastructure facilities | Correct | Building world-class infrastructure within SEZs is a core stated objective |
| 2. Promotion of investment from foreign sources | Correct | Attracting foreign direct investment is a central goal of the SEZ framework |
| 3. Promotion of exports of services only | Incorrect | SEZs promote exports of both goods and services, not services only |
SEZ Act, 2005 objectives:
| Point | Detail |
|---|---|
| Infrastructure | World-class facilities within SEZs |
| Investment | Attract domestic and foreign investment |
| Exports | Promote exports of goods and services, not services alone |
Answer: (a) 1 and 2 only.
Why each option is right or wrong
- (a) CORRECT. Infrastructure development and foreign investment promotion are both genuine stated objectives; the 'services only' export claim is too narrow.
- (b) Incorrect. Statement 3's 'services only' claim is false, so '3 only' cannot be correct.
- (c) Incorrect. Statement 2 (foreign investment) is correct, but pairing it with the flawed statement 3 makes this wrong.
- (d) Incorrect. Statement 3's restrictive 'services only' claim is inaccurate, so 'all three' cannot be correct.
Key point
The SEZ Act, 2005 aims to develop infrastructure and attract foreign investment — but it promotes exports of BOTH goods and services, not services alone.
Remember
SEZ Act, 2005: aims at infrastructure development and foreign investment promotion; exports cover BOTH goods and services, not services alone.
Common mistakes
- Assuming SEZs are focused only on service-sector exports, missing goods exports.
- Underestimating the infrastructure-development goal as a core SEZ objective.
- Not recognising foreign investment promotion as explicitly central to the SEZ framework.
Exam tip
SEZs promote BOTH goods and services exports. Any option restricting them to 'services only' is a trap.
Sources
- Special Economic Zones Act, 2005
- Special Economic Zones Rules, 2006