The Times they are for shenzhen

Context – Govt should adopt model of Autonomous Economic Zone for pushing growth in the country.

Unemployment

• Pre-Covid Time – Unemployment Rate 6% with Labour Force Participation Rate (LFPR) below 50% and Female LFPR at 24%.
• During Covid time – CMIE estimates unemployment rate at 27% with 122 million Indians rendered jobless.

Problems of Labour-intensive manufacturing sectors in India

• Tradition of encouraging small firms and Prohibiting large ones: impacted average firm size

Firm Size Distribution

• Labour intensive sector like apparel: 92% employment in small firms in India against 12% in China. 
• 5% labour work in large firms (workers > 200) in India against 57% in China.
• Small firm wages are just 20% of its large-firm wage in India compared to 60% in China.

Need of the hour: Autonomous Economic Zones to address job problems

• Median Size of Special Economic Zones in India is 0.30 sq km (Gujarat’s Mundra - 64 sq km) against China’s Shenzhen SEZ is 396 sq km.

Autonomous Economic Zones (AEZ)

• Arvind Panagariya suggested: India to establish 5-6 autonomous economic zones (AEZ) (minimum area 500sq km).
• Address misallocation of resources: by giving greater flexibility in retrenchment of labour, paying minimum wages, provide adequate social protection, consistent with international best practices such as Danish flexicurity model.
• Increasing floor space index for better utilisation of land. 
• PPP (Public Private partnership): address capital constraints and help with infrastructure development.
• Minimum export requirement: to prevent Rent seeking
• AEZ as a coordination device: for clustering of firms and economic activities and ensure access of well-trained workers with possibility of flexible labour adjustments. 
• Agglomeration of firms: will lead to technological spillovers, resulting in higher productivity.
• Minimised Transportation cost: by availability of variety of input suppliers in case increase in input demand.