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The introduction of Special Economic Zones (SEZs) in India has injected hope for augmented economic growth in recent future. The motive behind establishment of SEZs was mainly to fuel rapid economic growth, provide world class infrastructure and employment, promote exports, increase foreign exchange reserves and attract more Foreign Direct Investment (FDI). The main objective of the paper is to investigate whether the enactment of SEZ policies had any impact on inflow of FDI among Indian states. This is tested using panel data techniques on 16 groups of states over 14 years period from 2001 to 2014. The results indicate that enactment of SEZ policy (as well as operational SEZs) in a state has induced more FDI inflow. Based on the results, it can be concluded that the states, which want to benefit from FDI inflow, they need to enact the policies sooner.