Social Science (087) — AI-generated practice question

Special Economic Zones (SEZs) are industrial zones set up by the government where companies get world-class infrastructure facilities such as electricity, water, roads, transport, storage, and recreational and educational facilities.

Why the government sets them up:
The Indian government establishes SEZs to attract foreign companies to invest in India. Companies setting up production units in SEZs do not have to pay taxes for an initial period of five years. The government also allows flexibility in labour laws within these zones to reduce production costs, making India a more attractive destination for foreign investment and MNCs.

Source: Globalisation and the Indian Economy, Chapter 4 — Impact of Globalisation in India

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• The question has two parts: definition (1 mark) and reason/purpose (2 marks) — distribute your answer accordingly.
• Examiners expect the tax exemption for 5 years and world-class infrastructure to be mentioned specifically — these are the textbook details that earn marks.
• Avoid vague phrases like "to help the economy." Be specific: attract foreign investment, tax holiday, flexible labour laws.
• The answer is grounded in the "Steps to Attract Foreign Investment" section of Chapter 4.