India's Special Economic Zones Bring Rags and Riches ; India's New Public Policy Trend Is Enriching Some Farmers and Booting Others off Their Ancestral Lands

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Omkar Sharma knows that halfway across India, villagers like himself have sparked rioting in the countryside. Enraged by a government plan to buy farmland for private industry, they have destroyed bridges and blockaded roads outside Calcutta in clashes that have left several people dead.

Yet here, west of Delhi, where Mr. Sharma once worked the parched plains and a large global industry is also gobbling up acres of farmland, there is only quiet contentment. Until a few months back, Sharma's family of 12 had only a broken-down tractor to its name.

Now, after selling their land to one of India's largest companies, every member wants to buy a car - preferably an SUV.

Indians have greeted the country's most controversial economic reform, the Special Economic Zone (SEZ), from two contrary perspectives. Established a year ago as a cure for India's industrial woes - an ueberindustrial park offering up-to-date infrastructure and tax breaks - the zones have been hailed as economic saviors and denounced as thinly veiled land grabs.

The scene in Pahisaur is evidence that the zones can work, supporters say. But the mounting, sometimes violent, agitation among farmers outside Calcutta is creating momentum for reform.

With 200 zones already approved and hundreds more in the pipeline, economists acknowledge that the process is spiraling beyond its original intent. Moreover, the upheaval from West Bengal to Maharashtra in the east is a reminder that despite India's rising economic profile internationally, it remains a nation of poor farmers who are uneasy about the country's transition away from an agrarian past.

"A right balance has to be struck," says D.K. Joshi, an economist at the Indian credit-ratings firm CRISIL.

The balance, so far, has tilted in favor of developers, say critics. When India borrowed the SEZ concept from China last summer, it hoped to stir activity in its lagging industrial sector, offering companies "islands of excellence" amid India's pitted roads, unpredictable electricity supply, and punishing tax laws.

The response has surged beyond expectation. In the 27 years since China began its SEZ policy, it has established five such sites. In little more than a year, the state of Maharashtra alone already has approved more than two dozen.

What's more, many of the approvals have been less about industry and more about real estate speculation. According to his figures, only 25 percent of the SEZ approvals have gone toward industrial zones, with the rest for real estate, says Shameem Faizee, secretary of the Communist Party of India.

"It needs to be reversed," he says. The concern is that the zones are taking prime agricultural land and displacing farmers who have worked their land for generations. …