Experiences of Cluster Development in India

Structure of Presentation

Evolution of Policy Framework

• Technology focused interventions in clusters by State Bank of India under its UPTECH scheme in 1987

• Small Industries Development Bank of India (SIDBI) technology focused initiatives in 1991

• UNIDO conducted a survey of clusters in 1996 and identified 138 traditional manufacturing clusters

• In 1997 Abid Hussain Committee for SSI recommended for cluster development approach

• UNIDO launched its cluster development programme in 1997

• Ministry of MSMEs, GoI launched its UPTECH scheme in 1998 made more holistic in 2003 and modified in 2006,2007 and 2010

• In 1999-2000 budget, National Progarmme for Rural Industrialization was announced with a mission to set up 100 rural cluster every year

• In 2005-2006 budget support for development of Handlooms clusters was announced and also many ministries launched their programmes

• In 2006-2007 PM decided to constitute an Empowered Group of Ministers with mandate to lay down policy for cluster development and oversee its implementation

• During 2012 – 2017, emphasis on Innovative and Virtual Clusters

Evolution of Policy Framework

In 2002–2003 holistic development of clusters gathered momentum

Evolution of Policy Framework

Old Model (Before 1991)

Government drives economic development

through policy decisions and

direct incentives to Individual Enterprises

New Model (After 1991)

Private Sector drives economic development through collaborative

process involving government at

multiple levels, large companies, teaching and

research institutions

New Model (After 1991)

Private Sector drives economic development through collaborative

process involving government at

multiple levels, large companies, teaching and

research institutions

Evolution of Policy Framework

Evolution of Policy Framework

• During last decade 24 schemes/programmes of ministries of central and state governments have supported about 500 traditional and 1500 micro enterprise clusters

• 130 million USD was invested till 2006-2007• During 2007-12 allocated investment : 1 Billion USD

• Share:

Central government : 91.4%

State governments: 2.4%

Techno- financial institutions/ international

organisations : 6.2%

Status and Role of Clusters

Types of Clusters: Industrial clusters Handlooms clusters Handicraft/ artisanal clusters

Nos of Clusters: Industrial clusters: 1156 Handlooms/artisanal/micro enterprise clusters: 6000

Service clusters: 50 (only tourism) Healthcare clusters: 38

IT clusters: 59

Status and Role of Clusters

Status and Role of Clusters

• Clusters Account for:77% units72% employment61% investment58% output76% exports (MSME units)

• Clusters provide employment to 20 million persons

Some Prominent Indian Clusters

AHMEDABAD

BANGALORE

AMBUR

PANIPAT

ALLEPEY

RUDRAPUR

TIRUCHCHIRAPPALLI

MORBI

CHANDERI

JAMNAGARMAHESHWAR

HYDERABAD

KRISHNA DIST.

CHENNAI

KOTAYAM

BELLARY

KOTA

JALANDHAR

SINDHUDURG

LUDHIANA

PUNE

JAIPUR

TIRUPUR

ORISSA

Major Clusters in India

India Location of Clusters

Sector-wise SME clusters. All 1156 SME (industrial clusters) clusters produce 136 types of products which have been placed in 14 sectors as shown below. Food product sector has maximum number of 23% clusters followed by Textiles products with 14%, Metal products with 13% and Non Metallic Mineral Products with 10%, which makes that these 4 sectors alone constitute 60% of the clusters.

Overview of Schemes

• 24 schemes are being in operation by different ministries of the Government of India and state governments suited to different product sector and target groups

• Every scheme has its own way of defining clusters

Definitions of Clusters

Definitions of Clusters

DC (Handicrafts), Ministry of Textiles

Agglomerations having 100 artisans. In case of North East Region, Jammu & Kashmir and other hilly terrains, the clusters will have a minimum of 50 artisans.

NABARD, Cluster Development Programme

Micro enterprises and household units functioning on SHG mode and having a minimum of 50 beneficiaries upto a maximum of 200. In intensive clusters, the number of beneficiaries may go up to 500-700 and can even extend over a block or taluka.

Government of Gujarat

A minimum of 50 industrial units, indulging in the manufacture of the same or related products and located within a radius of 10 km in a particular location

Definitions of Clusters

Government of Orissa Handicraft Cluster

At least 100 traditional artisans practicing the same craft for non-KBK districts and at least 50 traditional artisans in KBK districts and situated within a radius of 3-5 kms.

UNIDO- CDP At least 100 SME units or 50 handicraft units in a town/ city or few villages and their surrounding areas for an industrial (traditional manufacturing) or an artisanal cluster respectively. Further a minimum of 500 handlooms for a handloom cluster

Major Schemes

(A)Name of the Scheme: Micro & Small Enterprise Cluster Development Programme of Ministry of MSME

Assistance Available For: Conducting diagnostic studies ; Skill development & up gradation of technology ; Marketing including exports ; Setting up common facilities centres ; testing laboratories ; design centers ; training institutes, ;common logistic centres ; infrastructural development etc.

Quantum of Assistance Soft interventions up to USD 0.05 million USDFor Common Facility Centres - 3 million USD

Assistance for CFC and infrastructure development given to “SPECIAL PURPOSE VEHICLE” formed by at least 20 members of cluster

Major Schemes

(B) Name: Scheme of Fund for Regeneration of Traditional Industries (SFURTI) of Ministry of MSME

Objective: to develop clusters of traditional industries and make them market driven and competitive

Definition: Traditional industry defined as an activity which produces marketable products, using locally available raw material, and skills and indigenous technology

Eligibility: Clusters of about 500 families of artisans, traders etc located within one or two sub – divisions in one or more contiguous districts

Major SchemesNature of Assistance: Available for replacement of machines, introduction of new designs, setting up CFCs, development of new products, and capacity building of artisans etc.

Quantum of Assistance: Average cost of various activities and extent of grant assistance indicated in the scheme

Nodal Agencies: KVIC & Coir Board of GoI

Implementing Agencies: NGOs, state and central government institutions having experience

Major Schemes(C) Name of Scheme: Industrial Infrastructure Up gradation Scheme of Ministry of

Commerce & Industry

Objective: Enhancing competitiveness of industry by providing quality infrastructure through Public Private Partnership (PPP) mode

Nature of Assistance: Available for creation/ up gradation for physical infrastructure, R&D Infrastructure, ICT infrastructure, quality certification, CFCs etc.

Quantum of Assistance: 75% of project cost subject to ceiling of 12 million USD with a minimum industry contribution of 15% For hill states and J & K, 90% of project cost and industry contribution 5%

Projects to be implemented by Special Purpose Vehicle (SPVs) of industrial units registered under Companies/societies act

Major Schemes

(D) Name of the Scheme: Mega Food Parks Scheme (MFPS) of Ministry of Food Processing

Objective: Providing adequate/excellent infrastructure facilities for food processing along the value chain from the farm to market.

Assistance: One time capital grant of 50% of the project cost (excluding land) subject to maximum of USD 10 million in general areas. 75% of the project cost subject to ceiling of 10 million USD in hilly and difficult areas.

Assistance available to SPVs formed of units and registered under the companies act.

Major Schemes(E) Name of the Scheme: Integrated Development Scheme for Handlooms Clusters of Ministry of Textiles

Objectives: Sustainable Development of weavers located in and outside the clusters. Clusters covering 300 – 500 handlooms are to be taken

Assistance: Available for setting up dying unit, CFC, quality control lab, Participation in exhibitions & fairs, design inputs and product development etc. Assistance limited to 0.12 million USD for each cluster

Implementing Agencies: Director of Handlooms & Textiles, Handloom Development Corporations of State Governments, Apex cooperative Societies, NGOs and organisations recommend by the state government and approved by DC.

Major Schemes(F) Name of Scheme: Baba Saheb Ambedkar Hastshilp Vikas Yojna – a scheme for Handicrafts Clusters of Ministry of Textiles

Objective: Integrated development of handicraft clusters

Assistance Available For: Social interventions, technological interventions, Marketing interventions, financial interventions, cluster specific infrastructural interventions

Assistance available to NGOs/ Cooperatives/ apex cooperative societies/ trusts/ COHAND/ NIFT/ DRDA/ State Handlooms & Handicraft Corporation.

Major Schemes(G) Name: Scheme for development of health clusters of Department of Ayurveda, Yoga, Naturopathy, Unani, Sidha and Homeopathy (AYUSH) of Ministry of Health

Objectives: To fill in the critical gaps in the sector related to standardization, quality assurance, productivity, marketing, infrastructure and capacity building etc.

Assistance: 60% of the cost of core interventions and 25% of cost of adds on interventions with an overall limit of 60% of the project cost subject to maximum of USD 2 million for each cluster. Assistance is available to SPVs formed by minimum of 15 units

N.N.SHARMAAssociate Professor

&Chairperson

India Centre for Public PolicyBirla Institute of Management Technology (BIMTECH)