The document discusses cluster development initiatives in India. It defines a cluster as a group of enterprises located in a contiguous area that produce similar products or services. It then discusses some of the challenges facing Indian industry, such as competitiveness in global markets. Several government institutions and programs aimed at cluster development are outlined, including the Micro and Small Enterprises- Cluster Development Programme, which aims to enhance productivity and competitiveness of small businesses. The UNIDO Cluster Development Programme also seeks to improve the performance and efficiency of small business clusters through pilot projects and policy assistance.

1. Definition of Cluster
A group of enterprises located within an identifiable and as far as practicable, contiguous area,
producing same/similar product/ services.
Definition of Cluster in Indian context
Clusters can be defined as sectoral and geographical concentration of enterprises, in particular Small
and Medium Enterprises (SME), faced with common opportunities and threats which can:
a. Give rise to external economies (e.g. specialised suppliers of raw materials, components and
machinery; sector specific skills etc.);
b. Favour the emergence of specialized technical, administrative and financial services;
Create a conducive ground for the development of inter-firm cooperation and specialization as well as
of cooperation among public and private local institutions to promote local production, innovation
and collective learning
CHALLENGES FOR INDIAN INDUSTRY
 Becoming More Competitive in the global market by cost-cutting, productivity improvement
and efficient management of supply chains, greater public and private investment in
infrastructure.
 Enhancing Access to Global Markets by greater policy coordination within the Indian
Government for a coherent approach to emerging trade policy issues, an institutional
partnership between the private sector and the Government in devising specific marketing
strategies.
 Safeguarding Intellectual Property by effectively administering copyright and patent
legislation, encouraging more innovations and patenting them.
 Promoting Small-Scale and Cottage Industries, and Regional Cluster Development by
removing policy impediments; financial support; technology, skills and quality upgrading;
market support and improving links between small and large firms.
 Increasing Exports

2. CLUSTER DEVELOPMENT INITIATIVES IN INDIA
Several institutions in India have taken up Cluster Projects besides various government initiatives.
The major ones being:
Central Government
 Development Commissioner (SSI), Ministry of Small Scale Industries
 National Small Industrial Corporation Ltd (NSIC)
 Development Commissioner (Handicrafts), Ministry of Textile
 Department of Science & Technology, Ministry of Science & Technology
 Textiles Committee of India, Ministry of Textiles
 Khadi and Village Industries Commission (KVIC)
 Coir Board
National Support Institutions
 Small Industries Development Bank of India (SIDBI) Technology Upgradation Programme
 State Bank of India (SBI) UPTECH Programme
 National Bank for Agriculture & Rural Development (NABARD)
State Governments
The State governments which have started cluster development initiatives are:
 Andhra Pradesh
 Gujarat
 Kerala
 Madhya Pradesh
 Tamil Nadu
Other Institutions
Following institutions are also having their respective cluster development initiatives:
 Grameen Development Services (GDS)

3.  Rajasthan Chamber of Commerce and Industry (RCCI)
MICRO & SMALL ENTERPRISES - CLUSTER DEVELOPMENT PROGRAMME (MSE-CDP)
Govt. of India, Ministry of MSME has announced the scheme for Micro and Small enterprises for
enhancing their productivity and competitiveness as well as capacity building.
Clustering of units also enables providers of various services to them, including banks and credit
agencies, to provide their services more economically, thus reducing costs and improving the
availability of services for these enterprises.
The name of scheme is Micro and Small Enterprises- Cluster Development Programme.- MSE-CDP
The main steps in cluster development
1) Selection of Cluster
2) Selection of CDE
3) Trust Building
4) Diagnostic study
5) Preparation of action plan
6) Approval of budget and leveraging of funds from various institutions.
7) Implementation of action plan
8) Monitoring and evaluation
9) Handing over and exit
10) Self management phase.
Objectives of Cluster DevelopProgramme
1. To enhance the productivity and competitiveness of micro and small enterprises.
2. To facilitate economies of scale in terms of deployment of resources.
3. To built capacity of MSEs through formation of SHG, Mutual credit guarantee funds, BDS
development etc.
 In cluster Programme there are following two main activities
1. Soft activity : This includes interventions for soft activities viz capacity building, market
development activities, management development and technology up gradation .
2. Hard Activity : This includes intervention for hard activities viz. Establishment of common
facility center (CFCs) etc.

4.  CDE- cluster Development Executive plays very important role in the project. He is the officer
from the Govt. agencies and one of the member of SPV. He conceptualises the overall
developmental strategy of the cluster, co-ordinates the activities and initiates implementation.
 Contribution of Ministry of MSME (Govt. of India) will not exceed 80% of the total project
cost. Subject to a ceiling of Rs. 10 crore per project including Rs. 10 lakh for soft activities
under soft interventions.
 Scheme expects at least 10% contribution from stake holders/ beneficiaries of the cluster
projects.
The ultimate result due to cluster projects
1. Increased income, investment, capacity utilisation, cost deduction, community
empowerment, energy conservation, pollution control.
2. Infrastructure creation and linkage through govt. scheme.
3. Enhance collective economic efficiency
4. Developing culture of co-operation and team work
5. Strengthened local governance strength.
6. Creation of competitive market.
UNIDO CLUSTER DEVELOPMENT PROGRAMME
The aim of the UNIDO Cluster Development Programme (CDP) in India is to contribute to the
overall performance and collective efficiency of the small and medium enterprise clusters for
sustainable development by assisting selected local communities of firms and associated
institutions in the clusters. This entails the implementation of cluster support initiative in selected
pilot clusters as well as assistance to central and local institutions in their programmes of cluster
modernisation and restructuring.
In the pilot clusters, UNIDO strives to act as a catalyst bringing about the necessary qualitative
changes at the cluster level.
At the policy level, the primary purpose of UNIDO’s intervention is to customise its
methodology to the Indian settings so that it can be shared with the partner institutions for
replication.

5. Selection of Clusters: This is a critical determinant of the success of the programme. A
judicious selection framework based on the cluster's importance, promoteability, viability and
sustainability helps to ensure an effective and wide reaching impact.
Diagnostic Study: The implementation of the Cluster Development Programme starts by
gathering dispersed knowledge through a participatory study not only about the constraints
and potential but also local linkages and support mechanisms. The participatory process helps
to build initial trust with the possible partners and secure the positive involvement of diverse
actors.
Trust Building: Establishing an atmosphere of trust within a cluster is an essential
prerequisite for building a realistic action plan for the cluster that will have support from
clients, service providers and support agencies.
Action Plan: The drafting of an action plan for the cluster as a whole is more than the sum
total of the demands set out by different cluster actors. It is indeed a roadmap that will help to
develop and foster lasting relationships among the cluster actors while at the same time
delivering visible results.
Implementation: The implementation of the action plan is not simply the realisation of the
targets set in the action plan, more ambitiously, a radical change in the way the cluster actors
interact with one another and conduct their business. The responsibility for implementation of
various activities is progressively shifted to the private sector with support drawn from local
institutions.
Monitoring and Evaluation: Monitoring of quantifiable outputs as a result of
implementation is an important component of cluster development as it helps disseminating
best practices and strengthening trust. Such task is made even more difficult than in
"traditional" SSI programs by the need to identify subtle and slowly emerging changes in the
relationships among cluster actors.
The Partner Institutions of UNIDO CDP are:
 Development Commissioner (SSI), Ministry of SSI
THE KEY ELEMENTS OF THE UNIDO METHODOLOGY ARE: