The special economic zones are critical elements that are being set up across the country with an objective to enhance foreign exchange and poverty reduction in India.

Special economic zones are geographical areas that have economic laws that are usually a step to increase foreign direct investment in the country. These regions are created as open market within an economy that will be under government regulatory control. The SEZ framework is a policy instrument of government of India designed to liberize the country's trade and investment environment in a series of pre- defined geographical areas. SEZ policy is one of the programmes of government to promote exports in order to transform fundamentally the foreign direct investment of landscape of the country. SEZ is considered as special physical enclave designed to promote foreign investment in a comprehensive range of economic activities ranging from manufacturing at one end to trading and financial services to other with a view to ensure that these investments operate in an unrestricted business environment.

So, besides providing state of art infrastructure and access to large and well trained skilled workforce, the SEZ policy also provides enterprises and developers with favorable and attractive framework of incentives since these special economic zones attract investment, generate export revenues and create manufacturing jobs they are given income tax exemptions. SEZ creates immense employment opportunities, they provide a lot of employment in terms of workforce and labor required. It also also has potential in creating employment in relevant industries. It plays a major role in developing balanced economic growth in country. This leads to tapping of local talent and contributing to economic activity. While special economic zones drastically improves economic activity in country, there are few challenges that needs to be discussed like economic regions are held responsible for bringing down agricultural activities, great threat of land grabbing and real estate landlords who greatly affect the future of SEZ.

Another benefits includes no requirement of import license, easy exemption from custom duties and central excise duties. The special economic zones brings capital to country in form of FDI which is definitely a necessity for developing economy in the country. This might involve tapping of local talent in order to increase economic activity. It should be properly managed for rapid economic growth that leads to profitable and sustainable development of country. Liberal policies and regulations will attract foreign investments and other major industries.