In a move aimed at supporting industries hit by weakening global demand, the Government of India has relaxed certain rules for Special Economic Zones (SEZs). The decision allows manufacturing units to sell goods more easily in the domestic market while offering temporary duty concessions.

The policy shift comes at a time when geopolitical tensions, particularly in the Middle East, have slowed global trade and impacted India’s export performance.

What Has Changed in SEZ Rules?

Under the new framework:

• SEZ units can now sell products in the domestic market with reduced duties
• Customs duty relief ranges between 5% and 12.5%, depending on the sector
• The relaxation is valid from April 1, 2026, to March 31, 2027
• It applies to units that began operations on or before March 31, 2025

This is a temporary, one-year measure designed to ease pressure on exporters facing declining international demand.

Why the Government Took This Step

The easing of SEZ norms is largely driven by a slowdown in exports due to global uncertainties. With demand weakening overseas, many SEZ-based manufacturers were struggling to maintain production levels.

By allowing limited access to the domestic market, the government aims to:

• Increase supply within India
• Support industrial output
• Prevent disruptions in manufacturing cycles

Experts Say Relief Is Limited but Useful

Industry experts believe the move offers partial relief but stops short of being a game-changer.

Gulzar Didwania noted that while the policy allows SEZ units to tap into domestic markets, the limited duty concessions may not significantly boost import substitution or encourage large-scale domestic sourcing.

He added that the decision reflects a subtle shift in India’s export strategy—balancing export focus with controlled domestic participation.

Textile and Apparel Sector to Gain the Most

According to A. Sakthivel of the Apparel Export Promotion Council, the textile and apparel sector is expected to benefit the most from this move.

He highlighted that:

• The industry is currently facing rising input costs
• Pricing pressures are affecting margins
• Global demand remains uncertain

The duty relief is expected to:

• Improve liquidity for exporters
• Reduce operational stress
• Ensure continuity in production

Will Domestic Market See Impact?

The new policy is also likely to increase the availability of goods in the domestic market. However, experts caution that the limited scale of duty reduction may restrict the overall impact.

While it may not drastically alter market dynamics, it could provide short-term stability for certain industries.

A Strategic Shift in Trade Approach

This move indicates a broader shift in India’s trade policy. Traditionally, SEZs have been strictly export-oriented, but the latest changes show a more flexible approach.

By allowing controlled domestic sales, the government is attempting to:

• Cushion industries against global shocks
• Maintain competitiveness
• Balance export growth with domestic supply needs