WHAT IS A FTZ ?

Free Trade Zone in India are also called “duty-free zones” or free trade warehousing zones (FTWZs).Free Trade Zones in India offer a wide range of facilities in which the goods can be stored, handled, rearranged, and repacked without incurring import taxes. These zones are designed to provide efficient logistics support, making your business operations simpler and more efficient. Acting as a bridge between local and international markets, Free trade zone in India can facilitate the smooth flow and the management of goods, enhancing trade processes and boosting the overall economic activity.

OBJECTIVES OF FTWZ in India :

The objectives of Free Trade and Warehousing Zones (FTWZ) in India are to develop trade-related infrastructure that facilitates the import and export of goods and services while allowing trade transactions in free currency. The scheme aims to create world-class warehousing for various products, equipped with state-of-the-art transportation and handling facilities, and provide commercial office spaces along with essential utilities such as water, power, communications, and connectivity. These zones are designed to function as integrated ‘international trading hubs’ offering one-stop clearance for import and export formalities. Strategically located near seaports, airports, and dry ports for easy access by rail and road, FTWZs are essential for improving logistics infrastructure, enhancing efficiency in EXIM trade, and eliminating inefficiencies in the movement and value addition of cargo.

Evolution of FTWZ in India :

In the mid-2000s, India introduced Free Trade Warehousing Zones (FTWZs) as part of a strategy to integrate with global trade systems, aiming to attract foreign capital and boost export activities. Formalized under the SEZ Act of 2005, FTWZs were strategically placed near major ports and airports to enhance connectivity and reduce logistical bottlenecks. Over time, regulatory refinements streamlined customs processes, attracting foreign investment and enabling overseas entities to manage inventories. FTWZs expanded services to include value-added operations like labeling and packaging, catering to diverse markets. With substantial tax benefits, the use of convertible currencies, and continuous policy reforms, FTWZs became integral to global supply chains, facilitating just-in-time delivery and supporting SMEs in accessing international markets. Future developments are expected to further integrate FTWZs with global trade networks, reinforcing their critical role in India's international trade.

Why FTZ in India

INDIA FREE TRADE ZONES (INTRODUCTION):

The government of India has established free trade areas all around the country with the main objective of attracting foreign direct investment (FDI) to the country and stimulating economic growth and activity. Foreign investors and business owners who set up in such free trade zones are provided with various incentives and free trade zone benefits

India’s free trade zones were first established in the late 1960s to boost exports and industrialization. Over the years, the government expanded these zones and introduced a range of incentives, such as tax holidays, duty-free imports and exports, simplified customs procedures, and infrastructure support. These measures aimed to attract both domestic and foreign companies to invest in these zones and set up export-oriented industries. In the Indian context, these zones are designed to boost exports, generate employment, and attract foreign direct investment (FDI)

The Role of Special Economic Zones

In India, these specialized free trade areas are known as Special Economic Zones (SEZs). They are considered duty-free foreign territories for all trading activities. Foreign investors and business owners who establish operations in these zones receive a variety of fiscal and non-fiscal incentives, along with benefits and support specific to free trade zones. SEZs operate under the regulations of the Special Economic Zone Act of 2005, enacted by the Indian government.

The concept of FTZs gained momentum in India in the early 2000s as part of economic liberalization measures. In 2005, the Special Economic Zones (SEZ) Act was enacted, providing a comprehensive legal framework for the establishment, operation, and management of SEZs. This act aimed to make Indian SEZs globally competitive by offering additional incentives and streamlining administrative processes.

As a result, India's SEZs have played a significant role in the country's economic growth. They have attracted significant investment, both domestic and foreign, and have become hubs for various industries such as information technology, pharmaceuticals, textiles, and automotive. These zones have contributed to the diversification of India's export base and have facilitated technology transfer and skill development.

Moreover, the strategic locations of many SEZs, often near ports and major cities, have enhanced their attractiveness by providing easy access to international markets and reducing logistical costs. The government continues to refine policies related to SEZs, ensuring they remain an integral part of India's economic strategy to enhance trade competitiveness, create jobs, and drive industrialization.

BENEFITS OF FTZ IN INDIA :

1.Free trade zone in India are strategically located around major seaports, international airports ensuring easy access via rail and road.

2.According to the World Bank's Doing Business Report 2020, India ranked 63rd out of 189 countries for Ease of Doing Business, indicating a favorable business environment.

3.New businesses can benefit from a complete exemption from income tax for the first five years of operation. They are also exempt from goods and services tax, minimum alternative tax, import duties on customs, and other taxes.

4.Duty exemption for imported raw materials, machinery, and components used for the production of goods meant for export has made Indian free trade zones attractive for manufacturing particularly for industries such as textiles, electronics, automobiles, and pharmaceuticals.

5.Clients can store their goods within a Free Trade Zone for 3 years with Zero Duty and Tax Implications which helps to reduce the Cash Flows for the duties and taxes and lessens the transit time for shipping in India

5.The Indian government permits foreigners to fully own their companies in most sectors, including within the Free Trade Zones, provided the business has at least one local resident director.

6.The government of India has taken steps to simplify customs procedures for businesses operating in these zones which includes providing a single-window clearance mechanism for obtaining various permits. These processes have reduced the time and effort required for companies to start their operations, contributing to the overall ease of doing business in India.

7.The cost of labor in India is low compared to other regions, making it advantageous for labor-intensive businesses.

9.As a developing country, India's growing economy presents opportunities for businesses to expand and thrive. The government has also implemented various business-friendly policies and initiatives to attract foreign investment.

The Future of FTWZs in India

Free Trade Warehousing Zones (FTWZs) in India seem to have a bright future. The logistics industry in India is growing at a rapid pace, and as the country’s economy keeps expanding, the demand for warehouse services will only continue to grow. With economic growth and an increased focus on improving access to goods and services across various locations, the Warehousing & Logistics Industry will continue to experience accelerated growth.

Predicting the exact future of Free Trade Warehousing Zones (FTWZs) in India after 2024 involves considering various factors, including economic trends, government policies, technological advancements, and global trade dynamics. However, here are some potential scenarios and trends that could shape the future of FTWZs in India:

1.Growth and Expansion: FTWZs are likely to witness continued growth and expansion as India focuses on enhancing its trade infrastructure and attracting foreign investment. The government may introduce policies to encourage the development of more FTWZs in strategic locations across the country, further facilitating trade and logistics operations.

2. Digital Technologies: The adoption of digital technologies such as blockchain, artificial intelligence, and Internet of Things (IoT) is expected to accelerate within Free trade zone in India. These technologies will improve efficiency, transparency, and security in supply chain management, enabling real-time tracking of goods and streamlining customs processes.

3.Enhanced Value-Added Services: FTWZs may evolve to offer a wider range of value-added services to meet the diverse needs of businesses. This could include customized packaging, labeling, assembly, and other services tailored to specific industries and markets, adding more value to the trade ecosystem.

4.Support for Small and Medium Enterprises (SMEs): FTWZs may play a vital role in supporting SMEs by providing them with access to international markets, efficient logistics infrastructure, and streamlined customs procedures. Special incentives and support programs could be introduced to encourage SMEs to utilize FTWZs for their import-export activities.

5.Integration with Global Supply Chains: With India's increasing integration into global supply chains, FTWZs are expected to become key nodes in the international trade network. This could lead to greater collaboration and partnerships between Indian FTWZs and global logistics players, further enhancing trade flows and connectivity.

6.Policy Support and Regulatory Reforms: Continued policy support from the government, including regulatory reforms and incentives, will be crucial for the sustained growth of Free trade zone in India. The government may introduce measures to streamline administrative processes, reduce hurdles, and provide financial incentives to attract investment in FTWZ infrastructure.