Cluster demand gains strength

It is an oft-asked question, how will the micro or small enterprises survive the heat of the mega-MNCs in the Indian market?

Well, cluster development of micro, small and medium enterprises (MSMEs) may have an answer, as in the next five years this sector is expected to receive a bounty in Rs. 3500-4000 crore of investments.

But money alone can't make MSME clusters flourish. There is a need for a fresh policy involving the Central government, the states and private players. 'Foundation for MSME Clusters' "" the organisation headed by Y K Alagh has come out with a status-paper, suggesting policy-points on cluster development programme.

Blending the responsibilities of the state with the role of private policy institutes, the organisation suggests that "Indian industrial and services sector develops into an inter-connected array of clusters to achieve higher levels of global competitiveness with inclusiveness and equity. Inclusiveness will be ensured by including the lagging clusters and supporting initiatives that not only ensure greater economic growth, but also address adequately the social and environmental concerns."

The 'Foundation for MSME Clusters' study shows support is required for 'soft' interventions like marketing, training, network creation, etc. as well as 'hard' interventions like creating infrastructure.

The first one calls for a support of Rs. 10-15 lakh per cluster per year and it should be for at least 3 years for traditional manufacturing and 5 years for 'poverty intensive' clusters.

Poverty intensive ones "" low-tech micro enterprise where the income (generally Rs 3000-4000) is barely enough to sustain the living, form the biggest block in Indian clusters, almost 94 per cent of 6500 odd clusters.

In India, clusters can be classified into 3 broad categories "" hi-tech (very few) which are innovative in nature, traditional manufacturing (around 400 in number) and rest is 'poverty-intensive' where employment and poverty implications co-exist.

Interestingly, the foundation's suggestions emphasise on infrastructure creation. "The policy should promote an enabling infrastructure to address mega challenges and utilise learning opportunities. Cluster activation can be preferred over cluster creation except where the local economy doesn't have important activities or it is linked to one or two endangered economic works. Create a cadre of human resources to initiative cluster development. All state governments should be prompted to go for cluster development and necessary policy creation."

Clusters "" co-existence of units producing similar types of products in a geographical location "" find their presence across the globe in at least 50 countries for MSMEs. Even though recognised long ago as a strategic mechanism for higher industrial development, its policy recognition in India was first made by the Abid Hussain Committee report in 1997.

During the last decade only 24 programmes were formulated, helping 1358 clusters with Rs.700 crore. The central government sponsored 91.4 per cent of the funding while the state government's share was 2.4 per cent and the remaining by private institutions. In next five years, about 80 per cent of the resources (of Rs 3500-4000 crore) is likely to be invested for creating infrastructure.

However, there is hardly any support for local institutional capacity and promotion of private sector-led development. Foundation for MSME clusters observed: "Despite a very robust cluster-based initiative in India, challenges remain in terms of defining a cluster and mapping policy needs. A blanket approach to leading or lagging area/dynamic or sinking sector can be ineffective and dilute the available resources and focus. At the operational level lack of funds and time-frame often causes disappointments."

According to the Foundation, "Data in terms of pollution, relocation, innovation, poverty alleviation, etc. need to be mapped for intervention. A cluster should be within an easily approachable distance for the local stakeholders. Naturally large clusters should not be sub-divided for implementation convenience. State governments and institutes may draw up their own criteria to define clusters depending on the suitability in their context."

It also calls for policy institutes to set up their own cluster-cells while "National and state level initiatives should reach out to clusters and customise knowledge and information delivery system. Central government should strengthen cluster information base, enable knowledge sharing across the states and institutions. Co-ordinate common programmes for technical assistance and undertake capacity-building initiatives."