CLUSTER DEVELOPMENT IN INDIA

Presented by:

Hareesh.M

ID.NO:2014600120

DEFINITION OF A CLUSTER A Cluster is A group of enterprises located within an identifiable and as

far as practicable, contiguous area, producing same/similar product/ services

A Cluster is defined by a product/product range (same or similar)and a place (name of a city, town, village)

A Cluster:does not involve a complete industry or a sectormust not be equated to an industrial park development concept

Objectives of Cluster Develop Programme

To conduct the soft activities and hard activities under soft and hard interventions for following objectives :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.

WHY CLUSTER DEVELOPMENT? Enables to reach out to many units at a time

Provides environment for mutual learning

Emerging from the felt-needs of the beneficiaries

Self-sustainability for continuous support

Clusters provide unique opportunity to address specific needs with specific solutions

Clusters provide economies of operation of scale

Increased impact and widening support from other support institutions

Satisfies the needs of foreign buyers

WHY CLUSTER DEVELOPMENT REQUIRES STATE INTERVENTION?

Cluster development is a long-term phenomenon with lower gains visible in short to medium term

Common facilities and programmes need State’s effort

Gains when they occur, are for sharing across the cluster

THE INDIAN SME CLUSTERS SCENARIO

With a contribution of 40 per cent to the country’s industrial output and 35

per cent to direct exports, India’s SME (Small and Medium Enterprises)

sector is the key driver in the nation’s economic growth.

India has 388 documented industrial clusters, around 400 handloom

clusters, about 3,000 handicraft clusters and 2,800 micro-enterprise clusters

that contribute significantly to its economy and provide employment to

more than 20 million people.

3.57 million SSIs, across 7,500 products spread over the country

350 SSI and 2000 artisans clusters contribute to 60% of exports

Among the larger clusters,

Panipat accounting for 75 per cent of the total blankets produced in the country.

Tirupur, which is responsible for 80 per cent of the country’s cotton

hosiery exports.

Agra with 800 registered and 6,000 unregistered small scale units making about 150,000 pairs of shoes per day with a daily production value of $1.3 million and exports worth $60 million per year.

Ludhiana, alone contributes 95 per cent of the country’s woolen knitwear, 85 per cent of the country’s sewing machines and 60 per cent of the nation’s bicycle and bicycle parts.

WHAT IS A CLUSTER?Cluster : An agglomeration of SSI Units?

Unit Unit

Unit

Unit Unit

METHODOLOGY OF CLUSTER DEVELOPMENT Selection of a Cluster

Selection of a Cluster Development Agent

Diagnostic study

Trust building

Preparation of action plan for intervention

Approval of budget and further leveraging funds

Implementation by trust building between Cluster Actors and CDA; Between Actor and other Actors

Monitoring and evaluation

Handing over and exit

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

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

ACHIEVEMENTS AND NEW INITIATIVES IN CLUSTER DEVELOPMENT BY THE

MINISTRY OF SSI

UPTECH SCHEME: THE EARLY INITIATIVE Launched in 1998

Aimed at development of selected clusters

Initially, emphasis on Technology Upgradation

Early interventions in Clusters of Ceramic Tiles, Bulk Drugs and Formulations, Foundry and Forging, Food Processing, Potteries etc.

ASSOCIATION WITH UNIDO FOCAL POINT

Ministry of SSI: the official counterpart agency in India

To provide a platform for sharing mutual learning & best practices

To design SME Cluster Development policies & Tools

National Level Steering Committee headed by AS&DC(SSI)

Interventions: Direct as well as through State Govts. & national

institutions.

Intervention in 4 Clusters completed, 3 nearing completion and 17

under implementation

Assisting Ministry of SSI to set up a comprehensive CDP

SECTORAL NATIONAL PROGRAMMES IN COLLABORATION WITH UNIDO

Industry & demand driven programmes

Active contribution in financing and implementation by UNIDO, State

Govts, FI’s, Industry Associations.

Comprehensive support services in technology upgradation, market

development, capacity building & sustainability

New interventions planned for knitwear, bicycle & parts

SMALL INDUSTRY CLUSTERDEVELOPMENT PROGRAMME (SSI-CDP)

Ministry’s own programme

Envisages comprehensive coverage of the whole country

Adopts a holistic approach

Capable partner institutions welcome to join

Stakeholders’ contribution & participation encouraged

PARAMETERS FOR SELECTION OF CLUSTERS UNDER SSI-CDP Distinct Technology & product

Potential for growth

Contribution to employment

Local leadership & support

Basic infrastructure

Presence of capable institutions

Recommended by other agencies

Need for socio-environ interventions

NEED FOR EXPERIENCE SHARING Mutual learning among implementing agencies in India

Learning from clusters outside the country

Repository of experiences and observation necessary at the national

level

Based upon 2 digit classification of NIC, distribution of clusters among important industry groups has been presented

MICRO & SMALL ENTERPRISES - CLUSTER DEVELOPMENT PROGRAMME (MSE-CDP)

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.

AN OVERVIEW OF ARTISAN BASED RURAL CLUSTERS IN INDIA India had initiated the program for rural industrialization in 1957 by

starting the Khadi and Village

Industries Program followed by Rural Industries program in 1962

However, in reality several units that came up attracted by these

incentives and subsidies did not last long because of limited markets,

lack of raw material, inappropriate skills and above all inadequate

infrastructure

According to an estimate there are about 2000 rural clusters in India.

These are mainly skill based

KEY CONSTRAINTS IN DEVELOPMENT OF CLUSTERS IN RURAL AREAS

(i) Lack of education and awareness among the rural entrepreneurs and

artisans,

(ii) Lack of organization among the entrepreneurs ,

(iii) Lack of marketing skills,

(iv) Dependency proneness on Government,

(v) Limited reach and effectiveness of the development assistance

(vi) Lack of infrastructure facilities such as electricity and roads

The consortium initiatives are much more effective and sustainable if they involve the entire range of actors with whom the SMEs commonly interact. Among such actors are :

Suppliers of raw materials, plant & machinery

❖ Consumers of goods and services from the SMEs testing laboratories (both private and public)

❖ Research and development institutions

❖ Industrial associations

❖ Technical, marketing and management consultancy organisations

❖ Training institutions

❖ Regulatory bodies enforcing/monitoring rules and regulations

❖ Local government

❖ Financial institutions For banks and financial institutions, the cluster approach may be beneficial as

❖ Separate packages/services can be developed for each cluster

❖ Products/services so developed can provide better yields

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.

Thank you