In order to boost the industrial activities in the country, the government has agreed to extend the benefits of special economic zones (SEZs) and National Investment and Manufacturing Zones (NIMZs) to the proposed industrial parks which would be developed in collaboration with China.
Both zones in the country enjoy tax related benefits. The SEZs benefit 100 percent income tax exemption on export income for the first five years, 50 percent for the next five years thereafter and 50 percent of the ploughed back export profit for next five years. On the other hand, NIMZs, under the National Manufacturing Policy, has provisions of tax incentives to small and medium enterprises (SMEs).
Since 1991 when India opened up its economy, the investment from China remained sluggish at mere $469 million till now as compared to $16-17 billion from Japan. The bilateral trade between China and India declined from around $75 billion in 2011 to $65.45 billion in 2013. China had already established five industrial parks in ASEAN countries like Vietnam, Cambodia and Indonesia and is keen to set up similar industrial parks in India.
Recently, India and China signed the memorandum of understanding (MoU) on the creation of industrial parks. As per the MoU between India and China, both countries have agreed for an Industrial Park Cooperation Working Group comprising equal number of representatives from both the countries. The group will share mutually agreed relevant information on the regulatory framework and investment priorities/projects as may be needed during the preparation of investment proposals. The MoU would enhance Chinese investments in India which in turn would help India for bridging the ballooning trade deficit with China, which now average around $35 billion a year.
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