A Special Economic Zone (SEZ) is a geographical region that has economic laws that are more liberal than a country's typical economic laws.
Special Economic Zones (SEZs) are specifically delineated duty-free enclaves treated as foreign territory for the purpose of trade operations, duties and tariffs. They offer total exemption from most of the duties and taxes.

Worldwide, the concept of SEZ  can be traced back to Ireland where the first Export Processing Zone was set up in 1960. However, it was in China that the SEZ model became a large scale success. Starting in 1980s, China today has about 1500 open  zones, under various names. According to World Bank estimates, there are about 3000 projects taking place in SEZs in 120 countries.

Indian Scenario

Considering the need to enhance foreign investment and promote exports from the country and realising the need that a level playing field must be made available to the domestic enterprises and manufacturers to be competitive globally, the Government of India’s  annual EXIM policy of 2000 announced SEZs in India. Apart from new SEZs, the erstwhile Export Processing Zones / Free Trade Zones are also converted into SEZs. Special Economic Zone Act was passed in 2005 and Special Economic Zone Rules in 2006

The main obstacles to the Industrial growth in India have been poor infrastructure, administrative interference, uncongenial tax laws and unfavorable labour laws and all these collectively driving away foreign investments. But with the SEZs providing solutions to each of these, there is enormous growth potential for Indian industry; manufacturing and service alike. With all the ingredients of SEZs, Indian businesses will sooner become globally competitive

In India, SEZs are engines of economic growth, supported by world class infrastructure and attractive fiscal benefits. In particular SEZs can be helpful for small and mid-sized businesses which can not afford to set up huge infrastructure on their own.`They can house their units in SEZs. As of 18th December 2008, 552 formal approvals are granted for setting up SEZs, of which 274 SEZs are notified. A a total investment of Rs. 69,350 crores is made. More than 2,00,000 jobs are created. Physical exports from SEZs in 2007-08 were Rs. 66,638 crores and projected exports for 2008-09 are Rs. 1,25,950 crores; the growth is colossal.