View of CONCEPTUAL RESEARCH ON I/O EFFICIENCY OFSPECIAL ECONOMIC SOUTH ZONES (SEZS)IN INDIA

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Vol. 03, Issue 11,November 2018 Available Online: www.ajeee.co.in/index.php/AJEEE

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CONCEPTUAL RESEARCH ON I/O EFFICIENCY OFSPECIAL ECONOMIC SOUTH ZONES (SEZS)IN INDIA

Ashok Kumar Yadav

Ass. Prof., Economics, Lalta Singh Rajkiya Mahila Mahavidyalaya, Adalhat, Uttar Pradesh

Abstract- The reason for this article is will measure those handling effectiveness about Visakhapatnam uncommon investment Zone (VSEZ; a national government-operated zone) different state private zones attempting under its locale to those period 2009–2015. An board about 30 zones, including VSEZ, may be chose should gauge preparation wilderness specialized foul wastefulness impacts On processing for zones utilizing a stochastic wilderness examination procedure. On fit frontier, three applicable enter variables, in particular crude material, money merchandise Furthermore lab our particular case yield variable, to be specific fares created those zones, would chose. The investigation watched that Cobb–Douglas creation capacity is additional preferable over transom work. Outcome indicates dismissal about our 1st invalid theory that enter variables don't make whatever critical commitment clinched alongside yield Concerning illustration every last bit information variables for example, such that crude material, capital merchandise and lab our altogether influence the amount of yield (exports). Any minor progress will prompt An major progress clinched alongside yield. Around the sum inputs, enter versatility about money merchandise should yield (exports) may be highest—2. 0855—implying that 1 % change previously, it will bring about a expansion from claiming 2. 0855 percentage On yield. Those 0. 4350 quality for the difference g parameters in this contemplate may be not close to to 1, suggesting that a percentage of the lingering varieties would because of the wastefulness impacts.

Keywords:-Cobb–Douglas, efficiency, production, special economic zone, stochastic frontier analysis.

I. INTRODUCTION

Uncommon monetary zones (SEZs) are termed Likewise enclave, separated starting with provincial area, over which a group for units revels in same framework Also offices. These zones need aid checked base bureaucratic regulation, world-class infrastructure, liberal expense holidays, concession absolution from Different taxes, that is, offers tax, custom duty, extract obligation Also boundless obligation free imports for crude material Furthermore capital merchandise. As stated by a standard definition provided for by reality bank (1992) and united countries mechanical advancement association (UNIDO, 1995), an SEZ is A mechanical region that constitutes a enclave for respect to custom levy Also business code in power in the group nat.

Nations throughout those planet have moved their introduction towards outward arrangements from internal strategies.

They change their economy which generally works under that prohibitive profession administration.

A large portion of the Creating countries will encourage universal exchange to the supported Growth of the economy Furthermore on build gdp

percentage; need recognized SEZs Likewise preferred options, instead of restructuring that whole economy.

Creating nations for example, such that Brazil, China, India, Taiwan, the Philippines, SRILANKA Furthermore a number others bring understood the vitality about remote immediate financing (FDI) clinched alongside investment growth; hence, should permit overwhelming stream of FDI, they need acquainted the idea about SEZs.

Therefore, bit by bit SEZs bring possessed a middle of everyone's attention in the national worldwide cognizance. Now, turning will India, accompanying different nations particularly because of certify accomplishment of the SEZ model On China, India need utilized the idea from claiming SEZ with invigorate fares Also support monetary development.

The Indian analyze started clinched alongside 1965, when Asia’s to start with zone might have been set up done 1965 done Kandla. Subsequently, large portions other zones were set up in distinctive states. These would Santacruz, Madras, Noida, Falta, cochin Furthermore Visakhapatnam.The whole idea behind

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2 setting up these zones was to increase theexports, attract FDI and hence accelerate the economic development of the country. But these zonesreported failure at their initial stages and did not give any input to the economy. Hence, with a view toimprove the functioning of these zones, make them comparable with Chinese zones and attract largerforeign investments in India, SEZs policy was announced in April 2000. Under the new policy, allexisting export processing zones (EPZs) were converted into SEZs. Earlier EPZs were renamed asSEZs. This policy intended to make SEZs an engine for economic growth supported by qualityinfrastructure united by attractive fiscal and non-fiscal packages.

This new SEZs policy compared toEPZs has more clarity and it is focused not only in terms of objectives but also in terms of institutionalplanning. It proposes a range of benefits and facilities including presence of single-window clearance system; more powers to zonal authorities;

exemption from custom, excise duty and sales tax; facilityof subcontracting;

permission to start trading; and service activities. The new policy allowed theinvolvement of private sector along with public sector. State government and private companies werealso motivated to set up SEZs. To in stil confidence in investors and to impart stability to the SEZ regime, the SEZs Act, 2005, waspassed by Parliament in May 2005, which got Presidential assent on 23 June 2005. After extensiveconsultations, the SEZ Act, 2005, supported by SEZ Rules, came into effect on 10th February, 2006.The SEZ Rules provides the simplification of procedures for development, operation, and maintenanceof the SEZs and for setting up and conducting business in SEZs.

There are varieties of reasons for introducing these zones that are varying from primary to secondary.The basic rationale for introducing this system is growth of economy through promotion of exports,creation of employment opportunities, attracting FDI and strong industrial base. According to Agarwal (2004; 2010), SEZs have the potential to stimulate direct employment and investment, promotingknowledge- intensive industries, diversifying local industrial base and localizing global value chain.Shah (2012) argues that these

enclaves are the mechanism to generate additional economic activity in theform of creating employment opportunities, infrastructure development and enhancing productivecapacity as well as capabilities. Dave (2012) also explained that benefit derived from SEZs is evident inthe form of additional generation of investment, export, employment and infrastructure development.

According to Kumar and Singh (2011), SEZs in the country serves as a vehicle of growth and development hrough impressive performance towards major economic parameters. Kumar and Tantri (2011) measures the role of SEZs in trade diversification of India and found that although the positive export earnings andsignificant contribution in national trade, Indian zones fails in diversification of export basket and strongindustrial base. However, these zones contribute to job creation, income generation, building humancapital, technological advancement, fostering solid industrial base and infrastructure development (Agarwal, 2005; Khurud, 2013;

Lakshmanan, 2009; Madani, 1999).

Seshadri (2011) views these enclavesas a mechanism to promote the higher level of exports.As these enclaves contribute to the economic development in variety of ways, accordingly, theseenclaves should be efficient in their operations and should make effort for the better utilization of theavailable resources.

For promoting efficiency among zones, nowadays, efficiency in operations is fixedas a benchmark for evaluating their performance rather than generating exports. The main problem withthis criterion is that it shows performance in absolute terms only. It may be possible that a zone generateshigher exports but is not considered efficient due to non- optimum utilization of resources. More exportscan be generated by increasing the ratio of input variables, increasing number of units, rising price ofgoods, etc.

On the other side, a zone which utilizes the available resources at optimum level may not beable to attain high efficiency.

In order to resolve this dilemma, in the present article, we have made anattempt to estimate the efficiency of these zones and evaluate their performance on the basis of efficiencynot on generation of exports.

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3 II. VSEZ: AT A GLANCE

Visakhapatnam extraordinary financial Zone (VSEZ), previously known as VEPZ, might have been secured those administration in the quite a while 1989 in the state of andesine. After the fact on, to 1994, it turned into operational. In the duration of the time of the prologue of the SEZs policy, 2000, The point when know working EPZs were changed over under SEZs, it might have been Additionally changed over clinched alongside 2003. It will be set up done an far reaching territory for 360 sections of land and it may be multi-product clinched alongside nature. Commercial enterprises for example, such that biotech, gems and jewellery, electronic equipment software, leather, materials and a lot of people others are working here. Its management organization will be completed toward the national administration. A government- appointed improvement chief (DC) serves concerning illustration the regulatory mind of a zone. Similarly as for every those SEZs Act, 2005, at private zones that hail under its locale ought to fill in under the control from claiming dc.

The DC of VSEZ exercises control over private zones spread across many states such as Andhra Pradesh, Chhattisgarh, Telangana and Yanam.

These private zones have to submit their quarterlyand half yearly reports as per prescribed pro forma to the DC. As in March 2015, total 100 different unitswere engaged in working to export; among them, the IT sector constitutes a major share. As in March2015, total 83 SEZs were formally approved by the Government of India under its jurisdiction. Out ofwhich, 72 are notified and 70 are operational. VSEZ offers excellent infrastructure tied with liberalpackage of incentives, concessions and other support services. The export- friendly administrative set-upensures disposal of all approvals and clearances instantly.All above astonishing features motivate us to measure the efficiency of these zones and drawconclusion for future policy implications.

III. REVIEW OF LITERATURE

To Indian connection also, a number of investigations could make found looking into wilderness approach as an instrument for measuring effectiveness.

Exactly of the unmistakable investigations

that analyzed those preparation Also specialized foul effectiveness (TE) of distinctive commercial enterprises are introduced further: Rao Also Vankateswarlu (2014) measure the relative effectiveness about non-life protection operator organizations for India by utilizing stochastic wilderness examination (SFA). Outcomes indicate that specialized foul wastefulness varies essentially About whether Furthermore mean that effectiveness score about organizations need been expanding starting with quite a while with quite a while yet all the rate about build clinched alongside tedeum need been really moderate. Goldman (2013) estimates the tedeum of rice processing previously, India Also its determinants. Effectiveness scores Also determinants were mutually evaluated utilizing SFA.

Outcomes indicate that farmers to tamilnadu state are additional effective over to Utter pradesh Furthermore West bengal. Determinants such as formal education, position and economic wellbeing from claiming rice farmers need a sure relationship for effectiveness scores. Bhandari and Maiti (2012) inspected those tedeum from claiming singular leather-producing organizations through two accepted tools—data envelopment dissection (DEA) Also SFA.

Their paper observes a critical affiliation between firm size its tedeum (Technical Efficiency) score Anyhow tedeum scores not related for the extent of the firm its period. Tantri (2012) evaluated the effectiveness of seven customary SEZs by adopting stochastic preparation for those time the middle of 1986–1987 Furthermore 2007–2008. Outcomes demonstrated that in spite of the fact that that effectiveness from claiming these enclaves enhances because of prologue from claiming SEZs policy, yet it may be a wide margin beneath the limit level distinguished by those writing.

Effects about wastefulness impacts model demonstrate that three determinants, in particular approach intervention, grouping of units Also vast geological area, need sure sway ahead effectiveness scores. Das & Drine (2011) analyzed the cost efficiency of banking sector byapplying stochastic frontier approach and concluded that public sector banks are more efficient followedby domestic private sector and foreign

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4 banks. Baten and Kamil (2010) have made an attempt to measure online bank deposit efficiency usingstochastic frontier technique and determination of various factors affecting efficiency level of banks.The study showed that nationalized commercial banks and Islamic banks are more efficient followedby private banks and foreign banks. On determinants side, asset of bank has significant impact onefficiency.

Results of inefficiency effects model shows that banks having large asset are less efficientthan those having small. Singha and Gayithri (2010) use a stochastic production function technique toevaluate separately the efficiency of foreign and domestically owned engineering firms. Findingsshow that foreign firms are technically more efficient than domestic firms. A positive relationshipexists between international trade and efficiency. Baten et al. (2009) have estimated the TE of teaindustry in Bangladesh using stochastic frontier production model. Through applying flexible Translogproduction function rather than Cobb- Douglas they observed that technical inefficiency existed in teafield and this inefficiency is depends on labour- specific variables and time. A negative relationship isalso found between size and yield. Bhandari and Maiti (2007) estimate TE of Indian textiles firms byusing Translog stochastic frontier production function and conclude that public sector firms arerelatively less efficient than private sector firms.

Variations in TE are accounted due to firm-specificvariables. Liu (2006) investigates the factors that affect then technical efficiency in Maize productionin Kenya. He applied different stochastic models and found the all models give same efficiency score.He also found that explanatory power of the exogenous factors affect the inefficiency. Mahesh (2006)employed stochastic frontier technique to estimate cost, profit and advance efficiencies of banks andeffects of liberalization on these three efficiency estimates. He concluded that liberalization hassignificant impact on all the three types of efficiencies. Public sector banks rank first in two of thethree efficiency measures. Lin and Tseng (2005) examined the operating efficiency of internationalport for the period 1999 to 2002 by applying both DEA and SFA

models. The analysis shows that totalaverage of operating efficiency scores of SFATR model is the highest (0.8217), followed by SFACDmodel (0.7979), DEABCC model (0.7075), and DEACCR model (0.6150) is the smallest.

It is found thatthe total average scores model SFACD is larger than other models so SFACD model is better than othermodels and SFA method is better than DEA method in measuring port efficiency. Parameswaran (2002) measured the efficiency of four firms against the background of economic policy introduced inIndia 1991. The results indicate that although, the change in the policy environment has a positiveeffect on the technical efficiency except in one industry, the level of efficiency is lower in the postreform period in all the industries considered. The decline in the level of technical efficiency happenedin a context of higher technical progress, identified as the upward shift of the best practice technologyin all industries. Mastromarco (2008) describe the different stochastic frontier model for cross sectionaland panel data. He also explains the case for time invariant inefficiency from the case where efficiencychanges over the time.

Bhattacharya, Lovell and Sahay (1997) observed that public sector banks aremore efficient followed by foreign and domestic private banks.

Wu (1993) applied a stochastic frontierapproach to estimate the production efficiency of Chinese manufacturing sector and its determinants.Analysis of results showed that lab our compensation, taxation incentives, agglomeration effect, capitaldepreciation and non-productive activities are important determinants of production efficiency. Theodoratos and Psychoudakis (1992) estimated production efficiency of dairy farms through twofrontier approaches, that is, SFA and DEA. He showed that mean TE obtained by SFA is larger thanthat obtained by DEA. Dairy farms appear to be characterized by increasing returns to scale under SFAand decreasing returns to scale under DEA.Through reviewing the existing literature, it becomes clear that in India, no study has been conductedon measuring production efficiency of SEZs (both government and private). Previous research conducted by Tantri (2012) has

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5 focused only on SEZs operated by central government and not on others. Hence, agap is present in literature. Therefore, the present study is an attempt to fill this gap and make somecontribution to literature.

IV. RESULTS AND DISCUSSION

The most extreme probability estimates of the Cobb–Douglas stochastic wilderness need aid accounted for. Greatest probability estimates from claiming parameters under stochastic wilderness model would acquire utilizing the project wilderness 4. 1 (Coelli & Battesse, 1996).

From those results, it may be watched that the greater part information variables, to be specific crude material, money merchandise Also lab our, need aid noteworthy during 1 percentage Furthermore 5 percentage. This demonstrates that they assumed a foremost part previously, estimating those effectiveness from claiming zone. At whatever slight change for information proportion will prompt major progressions previously, yield level. Estimates from claiming most extreme probability indicate that enter versatility of capital merchandise to yield (exports) may be most elevated (2. 0855). This implies that for a build for 1 % over enter money goods, yield about zones will expansion Toward 2. 0855 % alternately effectiveness about zones is demonstrated 2. 0855 percentage by capital products.

To the center of the crude material lab our, those versatility of the aggregate yield will be 0. 1975 0. 2524. This implies that 1 % increment over inputs will bring about an expand for 0. 1975 percentage Also 0. 2524 percentage of outputs.

Therefore, exhibit outcomes recommend those ideal use for every last bit information variables with accomplish proficiency previously, handling.The significant value of γ indicates the significant relationship between capitalgoods, raw material and labour.

The 0.4350 value for the variance γ parameter in this study is positivebut not near to 1, suggesting that some of the residual variations are due to the inefficiency effects. It alsoindicates that 43.5 per cent of the variation in production is due to technical inefficiency and 56.5 percent is due to the stochastic random error. On the other hand, parameters such as eta (η) represent time

invariantefficiency and have relevance in the case of panel data. It indicates that technical inefficiencyeffect varies significantly over time. In the present article, the value of eta is found significant at 1 percent level, showing the sign of time-invariant inefficiency. Our study rejects the null hypothesis (η = 0)and indicates that technical inefficiency effect varies significantly over the periods.

V. CONCLUSION

This ponders kept tabs with respect to estimation of creation effectiveness for VSEZ also how private zones under its ward applying SFA methodology. Our outcomes prompt those dismissal about To begin with invalid theory (inputs don't fundamentally influence the output). We need watched that the sum information variables, in particular import for crude material, money merchandise and lab our, bring essentially influenced those creation finished toward these zones.

Every last bit variables are found on be huge toward 1 % and 5 percentage levels Also demonstrate certain indications from claiming coefficients. Those evaluated worth of γ demonstrates that 43. 5% of the variety previously, generation happens because of specialized foul wastefulness inasmuch as 56. 5% is because of that stochastic irregular lapse.

It intimates that firm particular variables bring All the more impact for preparation variety instead of specialized foul effectiveness. Invalid theory that η = 0 may be likewise rejected our ponder similarly as A large number proof from claiming time-varying wastefulness impacts need aid discovered.

It will be additionally watched that private zones have performed superior to

zones worked toward the

legislature.Among all private zones, Wipro Ltd (Manikonda) has highest efficiency score for the entire study period,whereas zones such as APIIC Ltd (Kesarapalli), APIIC Ltd (Naidupeta), Sri City Pvt. Ltd and HeteroInfrastructure Ltd have lower efficiency scores compared to others. As far as mean efficiency isconcerned, it is found to be 0.1442 at aggregate level, which is considered very low as per the benchmarkfixed by the literature. The study also reveals the fact that at both aggregate and disaggregate levels, noneof the zones has obtained the efficiency scores equal or above the benchmark. At

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6 the aggregate level, themaximum mean score is 0.1982, while at the disaggregate level, it is 0.6302.

The present article concludes with the following suggestions. Since all input variables are playing avital role in determining the efficiency, therefore efforts should also be made for optimum utilization ofresources. For improving the ranking of zones run by the government, some concrete changes should beintroduced in policy, strategy, management, administration, infrastructure and others aspects. Efforts forpopularizing and implementation of public–private partnership (PPP) concept should be done to reap outthe benefits of privatization and minimize the risk for both the parties.At last, the present study can also be used as a benchmark in determining the efficiency of other SEZsin India as appropriate.

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