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The trade and manufacturing landscape in India is now entering into a new phase. Over the next two years (to 2025/26) the government intends to support focused initiatives to address the chronic problems faced by SEZs through Budget 2026. As a result of this increased focus, there has been renewed interest in making SEZ reforms, and there is clearly an urgent need for immediate attention to these types of reforms. Finance Minister Nirmala Sitharaman said, “We are looking at adding some additional provisions for SEZs to breathe new life into them,“—indicating a significant emphasis on the importance placed upon revitalising the existing SEZs. In this blog, we explore how ongoing SEZ reforms under Budget 2026 are reshaping India’s trade landscape and where FTWZ in India fits within this evolving strategy.
Why SEZ Reforms Are Back in Focus
Special Economic Zones have been a key pillar of India’s export-led growth strategy. Over time, however, several SEZs have faced operational and structural challenges. While exports and investments from operational units have shown resilience, the number of active units has declined, pointing to deeper issues related to regulatory rigidity, cost structures, and limited integration with domestic manufacturing.
This has prompted policymakers to re-examine the existing framework. The renewed focus on SEZ reforms is aimed at improving ease of operations, aligning zones with contemporary supply chain models, and ensuring that SEZs remain relevant in a changing global trade environment. Budget 2026 is expected to play a role in addressing these challenges through calibrated policy and fiscal measures.
The Direction of SEZ Reforms
The intent behind current SEZ reforms is not to dismantle the SEZ model, but to modernise it. Experts and policymakers have made several recommendations and held discussions.
- Better integration of SEZs with the domestic economy
- Reduce procedural-related compliance burdens on the Export-Import (EXIM) sectors.
- Provide greater flexibility for manufacturers within SEZ units.
- Align SEZs with changing logistical and manufacturing needs.
The above policy framework represents a trend in India’s global trade policy. Rather than viewing SEZs as isolated industries with support from the Government of India, India has centre-based SEZs as a component of a larger framework of manufacturing and global trade.
FTWZ in India: A Component of the SEZ Framework
FTWZ in India holds more importance today than FTZs were before, due to their status as specific types of Special Economic Zones under the SEZ Act, their regulatory structure, and their intended use for trade and logistics operations by providing both bonded customs warehousing and added value services for imports. FTWZs provide the same level of regulatory oversight as other SEZs and have a narrower operational focus. By allowing businesses to store goods imported from foreign countries without having to pay customs duties at the time of importation; perform certain value-added services on the imported goods; and efficiently facilitate the movement/distribution of such imported goods domestically and internationally, they represent a vehicle for businesses in India that import and export products worldwide.
Alignment Between SEZ Reforms and FTWZ Operations
SEZ reforms are moving to align with many of the principles currently discussed regarding flexibility, efficiency, and integration, as has already been achieved through the establishment of Free Trade Warehousing Zones (FTWZ) in SEZs and their use to fill gaps in logistics and warehousing solutions for trade. The provision of duty deferrals, staged clearance processes, and re-export capabilities provided by FTWZ in India enable a broad range of logistical planning and working capital management for importers and exporters. These same features support the reform of SEZ processes to allow them to be more responsive to the demands placed on them by the business environment while ensuring all regulatory requirements are met.
Responding to Modern Supply Chain Requirements
In today’s marketplace, managing global supply chains presents businesses with greater complexity, including managing international price volatility, the uncertainty of demand, and the use of multiple countries to source products. An operationally flexible trade zone is an integral component when dealing with these challenges. FTWZ in India service this operational flexibility for Indian businesses and are thus a vital part of the Special Economic Zones (SEZ) framework.
With FTWZ, businesses are able to:
- Store imported goods while they are still under customs bond
- Clear goods to enter into domestic markets as there is demand for those products
- Re-export goods without experiencing a duty charge
- Compete with other countries’ FTWZ warehouses by providing logistical services to add value to imported goods, including repacking, labelling and consolidation
The foregoing capabilities strengthen the efficiency of business supply chains and are consistent with SEZ reforms to enhance the operational capabilities of all SEZ zones.
OSV FTWZ and India’s Global Trade Integration
OSV FTWZ is one way that the operations of FTWZ in India under the SEZ Act in India can complement and support the ongoing SEZ reforms. The capabilities of duty deferred storage, value-added services, and the efficient redistribution of goods through the use of OSV FTWZ provide global companies with the opportunity to utilize India as a strategic trade and logistics hub.
The activities of such FTWZ’s further strengthen India’s position in Global Value Chains through facilitating smoother Cross-Border Trade while fully complying with the associated regulatory and customs frameworks. Overall, the SEZ reforms which aim to improve the efficiency and flexibility of existing SEZ’s, along with facilities such as the OSV FTWZ will further increase the competitiveness of India in the Global Trade Marketplace.
Conclusion
By bringing renewed emphasis upon SEZ reforms before the introduction of budgets in 2026 demonstrates the Indian government’s desire for the continued development of India’s international trade infrastructure and its long-term participation in worldwide manufacturing and supply chain integration. At the same time, FTWZs functioning within the SEZ framework have provided support through flexible, efficient, and compliant trade practices, which are complementary (via supportive operations) to calibrating the imminent SEZ reforms effort. As such, with SEZ and FTWZ in India reform working together, India’s global competitiveness and reliability as a logistics and trade hub will be further enhanced.