As others have pointed out, the other key feature of China’s approach which is worth emulating was decentralisation. Local governments were the drivers of the CEZ policy, with local bureaucrats and party functionaries being given promotions and other benefits that linked the economic progress of their areas.
As Lotta Moberg of George Mason University had pointed out in a research article in 2015, comparing the Indian and Chinese SEZ policy, the differentiating factor for China was that decentralisation was important in making China’s CEZ scheme robust, and hence, a key component in its success.
Ironically, India already has an example where decentralisation has been the key to economic success in specific regions. The so-called non-major ports—an euphemism for private ports, such as Mundra and Kakinada—have become key to India’s export drive.
These ports are under the administration and control of state governments and with much more autonomy and decision-making than the major ports—again, an euphemism for centrally controlled ports—account for a large chunk of Indian exports today.
This success makes such ports, and similar new ports, ideal candidates for the setting up of Coastal Economic Zones. Thus, getting on with CEZs ticks all the boxes required in a credible public works programme, creating jobs and investments, spurring exports and serving as the new face of India to attract foreign direct investment.
This was actually the original Chinese model as well. China established four large CEZs along its coast and located them close to Taiwan and Hong Kong; the key was location. This maximised the ability of the new CEZs to draw business from these other much developed states.
Coastal location allowed these firms to operate in world markets, unhindered by the poor infrastructure in the hinterland. They could import inputs from and export outputs to foreign destinations with ease. Employment opportunities for Chinese workers multiplied, as Panagariya had pointed out in his report.
Part of Panagariya’s proposals are being implemented as part of the Sagarmala Project, which envisages the development of ports and, importantly, port infrastructure connectivity to the hinterland.
It is logical, therefore, to move to the next step of formally setting up of Coastal Economic Zones. The key benefits is the kind of firms that would be attracted to such CEZs—large-scale companies with high ability to employ large numbers of workers, with high capability for technology absorption and transfer.
The CEZs would act as beacons of infrastructure and regulatory improvements and provide a huge demonstration effect for the art of the possible in the rest of the country. It will be worthwhile for India to consider setting up Coastal Economic Zones.