The US has no SEZs, and cost of labor is not cheap, yet hundreds of foreign companies some calling every year to set up shop - the Japanese are building more cars in the US than they export from Japan, to the US market, and so are the Germans. The $64 question: Why? To be near their customers and create value(goodwill) for their companies by being good corporate 'citizens'. And yes, many such corporations do shop around for the best deals from various states and municipalities, like free infrastructure development, tax-breaks, and who even issue bonds for construction of the needed infrastructure like roads, sewage treatment etc., to sweeten the deal. The moral of the story: if the Indian market is so hot, is such an attractive deal, then those willing to invest will do so anyways, especially with such a huge, captive consumer base. So SEZs are really not necessary - just provide the 'perks' - taxbreaks, infrastructure and hassle-free access, and they'll come.
