1. CLUSTER DEVELOPMENT IN INDIA
DEFINITION OFA CLUSTER
A ClusterisA group of enterpriseslocatedwithinanidentifiableandasfar as practicable,
contiguousarea,producingsame/similarproduct/services
A Clusterisdefinedby
a product/productrange (same or similar)
and a place (name of a city, town,village)
A Cluster:
doesnotinvolve acomplete industryorasector
mustnot be equatedtoan industrial parkdevelopmentconcept
ObjectivesofClusterDevelopProgramme
To conduct the softactivitiesandhardactivitiesundersoftandhardinterventionsforfollowing
objectives:
1. To enhance the productivityandcompetitivenessof microandsmall enterprises.
2. To facilitate economiesof scale intermsof deploymentof resources.
3. To builtcapacityof MSEs throughformationof SHG,Mutual creditguarantee funds,BDSdevelopment
etc.
WHY CLUSTER DEVELOPMENT?
Enablestoreach out to manyunitsat a time
Providesenvironmentformutual learning
Emergingfromthe felt-needsof the beneficiaries
Self-sustainabilityforcontinuoussupport
Clustersprovide unique opportunitytoaddressspecificneedswithspecificsolutions
Clustersprovide economiesof operationof scale
Increasedimpactandwideningsupportfromothersupportinstitutions
Satisfiesthe needsof foreignbuyers
WHY CLUSTER DEVELOPMENT REQUIRES STATE INTERVENTION?
2. Clusterdevelopmentisalong-termphenomenonwithlowergainsvisible inshorttomedium
term
Commonfacilitiesandprogrammesneed State’seffort
Gainswhentheyoccur, are forsharingacross the cluster
THE INDIAN SME CLUSTERS SCENARIO
Witha contributionof 40 percent to the country’sindustrial outputand35 per centto direct
exports,India’sSME(Small andMediumEnterprises) sectoristhe keydriverinthe nation’s
economicgrowth.
Indiahas 388 documentedindustrial clusters,around400 handloomclusters,about3,000
handicraftclustersand2,800 micro-enterprise clustersthatcontribute significantlytoits
economyandprovide employmenttomore than20 millionpeople.
3.57 millionSSIs,across7,500 productsspreadoverthe country
350 SSIand 2000 artisansclusterscontribute to60% of exports
Among the largerclusters,
Panipataccountingfor75 per centof the total blanketsproducedinthe country.
Tirupur,whichisresponsible for80per centof the country’scotton
hosieryexports.
Agra with800 registeredand6,000 unregisteredsmall scale unitsmakingabout150,000 pairs of
shoesperday witha dailyproductionvalue of $1.3 millionandexportsworth$60 millionper
year.
Ludhiana,alone contributes95percent of the country’swoolenknitwear,85 percent of the
country’ssewingmachinesand60 percent of the nation’sbicycle andbicycle parts.
METHODOLOGY OF CLUSTER DEVELOPMENT
Selectionof aCluster
Selectionof aClusterDevelopmentAgent
Diagnosticstudy
Trust building
Preparationof actionplanfor intervention
Approval of budgetandfurtherleveraging funds
3. ImplementationbytrustbuildingbetweenClusterActorsandCDA;BetweenActorandother
Actors
Monitoringandevaluation
Handingoverand exit
CLUSTER DEVELOPMENT INITIATIVES IN INDIA
Several institutionsinIndiahave takenupClusterProjectsbesidesvariousgovernmentinitiatives.The
majoronesbeing:
Central Government
DevelopmentCommissioner(SSI),Ministryof Small Scale Industries
National Small Industrial CorporationLtd(NSIC)
DevelopmentCommissioner(Handicrafts),Ministryof Textile
National Support Institutions
Small IndustriesDevelopmentBankof India(SIDBI) TechnologyUpgradationProgramme
State Bank of India(SBI) UPTECH Programme
National BankforAgriculture &Rural Development(NABARD)
State Governments
The State governmentswhichhave startedclusterdevelopmentinitiativesare:
AndhraPradesh,Gujarat,Kerala,MadhyaPradesh,TamilNadu
ACHIEVEMENTS AND NEW INITIATIVESIN CLUSTER DEVELOPMENT BY THE MINISTRY OF SSI
UPTECH SCHEME:
THE EARLY INITIATIVE
Launchedin1998
Aimedatdevelopmentof selectedclusters
Initially,emphasisonTechnologyUpgradation
Early interventionsinClustersof CeramicTiles,BulkDrugsandFormulations,Foundryand
Forging,FoodProcessing,Potteriesetc.
4. ASSOCIATION WITHUNIDOFOCALPOINT
Ministryof SSI: the official counterpartagencyinIndia
To provide aplatformforsharingmutual learning&bestpractices
To designSME ClusterDevelopmentpolicies&Tools
National Level SteeringCommittee headedbyAS&DC(SSI)
Interventions:Directaswell asthroughState Govts.& national institutions.
Interventionin4 Clusterscompleted,3nearingcompletionand17 underimplementation
AssistingMinistryof SSItosetup a comprehensiveCDP
SECTORAL NATIONALPROGRAMMES
IN COLLABORATION WITHUNIDO
Industry& demanddrivenprogrammes
Active contributioninfinancingandimplementationbyUNIDO,State Govts,FI’s,Industry
Associations.
Comprehensivesupportservicesintechnologyupgradation,marketdevelopment,capacity
building&sustainability
Newinterventionsplannedforknitwear,bicycle &parts
SMALL INDUSTRY CLUSTER
DEVELOPMENT PROGRAMME (SSI-CDP)
Ministry’sownprogramme
Envisagescomprehensive coverageof the whole country
Adoptsa holisticapproach
Capable partnerinstitutionswelcometojoin
Stakeholders’contribution&participationencouraged
PARAMETERS FORSELECTION OF CLUSTERS UNDER SSI-CDP
DistinctTechnology&product
Potential forgrowth
5. Contributiontoemployment
Local leadership&support
Basic infrastructure
Presence of capable institutions
Recommendedbyotheragencies
Needforsocio-environinterventions
NEED FOR EXPERIENCESHARING
Mutual learningamongimplementingagenciesinIndia
Learningfromclustersoutside the country
Repositoryof experiencesandobservationnecessaryatthe national level
6. Based upon 2 digit classificationofNIC, distributionof clustersamong important industry groups has
beenpresented
7.
8. MICRO & SMALL ENTERPRISES - CLUSTER DEVELOPMENTPROGRAMME (MSE-CDP)
Contributionof Ministryof MSME (Govt.of India) will notexceed80% of the total projectcost.
Subjecttoa ceilingof Rs.10 crore perprojectincludingRs.10 lakh for softactivitiesundersoft
interventions.
Scheme expectsatleast10% contributionfromstake holders/beneficiariesof the cluster
projects.
AN OVERVIEWOF ARTISAN BASEDRURAL CLUSTERS IN INDIA
Indiahad initiatedthe programforrural industrializationin1957 bystartingthe Khadi and
Village
IndustriesProgramfollowedbyRural Industriesprogramin1962
However,inrealityseveral unitsthatcame upattractedby these incentivesandsubsidiesdid
not lastlongbecause of limitedmarkets,lackof raw material,inappropriate skillsandabove all
inadequate infrastructure
Accordingto an estimate there are about2000 rural clustersinIndia.These are mainlyskill
based
KEY CONSTRAINTSIN DEVELOPMENTOF CLUSTERS IN RURAL AREAS
(i) Lack of educationandawarenessamongthe rural entrepreneursandartisans,
(ii) Lackof organizationamongthe entrepreneurs,
(iii) Lackof marketingskills,
(iv) DependencypronenessonGovernment,
(v) Limitedreachandeffectivenessof the developmentassistance
9. (vi) Lack of infrastructure facilitiessuchaselectricityandroads
KEY CONSTRAINTSIN DEVELOPMENTOF CLUSTERS IN RURAL AREAS
(i) Lack of educationandawarenessamongthe rural entrepreneursandartisans,
(ii) Lackof organizationamongthe entrepreneurs,
(iii) Lackof marketingskills,
(iv) DependencypronenessonGovernment,
(v) Limitedreachandeffectivenessof the developmentassistance
(vi) Lack of infrastructure facilitiessuchaselectricityandroads
The consortium initiativesare much more effective andsustainable if theyinvolve the entire range of
actors withwhomthe SMEs commonlyinteract.Amongsuchactorsare :
Suppliersof rawmaterials,plant&machinery
❖ Consumersof goodsandservicesfrom the SMEs testinglaboratories(bothprivate andpublic)
❖ Researchanddevelopmentinstitutions
❖ Industrial associations
❖ Technical,marketingandmanagementconsultancyorganisations
❖ Traininginstitutions
❖ Regulatorybodiesenforcing/monitoringrulesandregulations
❖ Local government
❖ Financial institutionsForbanksandfinancial institutions,the clusterapproachmaybe beneficial as
❖ Separate packages/servicescanbe developedforeachcluster
❖ Products/servicessodevelopedcanprovide betteryields
The ultimate resultdue to cluster projects 1. Increasedincome,investment,capacityutilisation,cost
deduction,communityempowerment,energyconservation,pollutioncontrol.
2. Infrastructure creationandlinkage throughgovt.scheme.
3. Enhance collectiveeconomicefficiency
4. Developingcultureof co-operationandteamwork