Lack of satisfactory and timely banking finance, unavailability of needful technology, low production capacity, limited knowledge, toothless marketing strategy, non-availability of skilled labour, etc are not the only challenges faced by the micro and small medium enterprises (MSMEs). As liberalization prevails in the global economy, small firms are also under tremendous pressure of other factors like innovation, restructuring of operations and problem in achieving production efficiencies.
The competition between a small and big firm is not only in price and
size, but also compete on the basis of their ability to innovate. Hence,
in order to maintain sustainability in this ever-changing global
economy, SMEs should also adopt innovative techniques and should undergo
with continuous improvement in their product, process, like big
players. However, non-availability of resources is the major roadblock
in the growth of SMEs. Analysts feel that 'cluster development' has
potential to address the issue of resource-gap.
A 'cluster' is a sectoral assemblage of enterprises which are facing
common opportunities and challenges. MSMEs can access skilled and highly
educated labour and pooled business services via enterprise clusters
and networks MSMEs having particular interests.
UNIDO, the UN specialized industrial agency, defines a cluster as “a
sectoral and geographical concentration of small/medium enterprises
facing common opportunities and threats”.
Objectives of a cluster development scheme:
Cluster development programme is aimed to mitigate various challenges
faced by the Indian industry, primarily by the small industries. The
main objectives include:
- Extending support to boost MSMEs’ businesses by addressing general
issues like improvement of technology, skills and quality, market
access, access to capital, etc.
- Building MSMEs' capacity with the formation of self help groups, consortia, upgradation of associations, etc
- Creating and upgrading infrastructural facilities in the new/existing industrial areas/clusters of MSME
- Setting up of common facility centres for testing, training, complementing production processes, etc.
In addition, clustering of units also helps services providers, like
banks and credit agencies, to facilitate their services to small firms.
Cluster Composition
The process of cluster development usually consists of the following steps :-
- Choosing Cluster Development Agent
- Diagnostic Study
- Developing action plan
- Smoothening the process of technology shift from producer to end user
- Setting up of Common Facility Centres (CFCs)
- Organising workshops, seminars, training and reaserch visits for
faster dissemination of technology across the cluster of small
enterprises
Cluster Development Programmes
As mentioned earlier, industrial clusters are recognised as an
effective means of business development and promotion of small firms.
The easy reach to specialized suppliers of raw materials, parts and
components, machinery, skills and technology as well as other supporting
services can enable enterprises to improve competitiveness. Cluster
development not only improves the competitiveness of industry, rather it
also acts as an instrument for alleviation of poverty, generation of
sustainable employment, fostering innovation, enabling better, effective
and sustainable credit flow.
Cluster development enables SMEs to establish a strong position in
the global market in a number of traditional products such as shoes,
leather handbags, knitwear, apparel, furniture, tiles, musical
instruments, food processing and also in the industries which supply
machinery to these sectors.
In India, there are around 7,000 clusters in traditional handloom,
handicrafts and modern SME industry segments. As per the estimations,
there are about 2500 unmapped rural industry clusters in the country.
Cluster Development Initiatives in India
Citing the benefits of cluster development and in attempts to extend
support to the small firms, several institutions in India have taken up
Cluster Projects. The major institutions involved with cluster
development initiatives in India include the following:
- National Small Industrial Corporation Ltd (NSIC) – NSIC
was established in 1955 by the Government of India with a view to
promote, aid and foster the growth of small Industries in the country.
- Development Commissioner (Handicrafts), Ministry of Textiles
- The Baba Sahab Ambedkar Hastshilp Vikas Yojana Scheme (AHVY) has been
launched under this institution. The scheme is aimed at promoting
Indian handicrafts by developing artisans clusters into professionally
managed and self reliant community enterprises.
- Small Industries Development Bank of India (SIDBI) Technology Upgradation Programme -
SIDBI implements various measures/activities aimed to make the Indian
SME sector more competitive. Its cluster development work started as
early as 1991 and SIDBI has intervened in around 30 clusters till date.
- National Bank for Agriculture & Rural Development (NABARD) – NABARD
is a development Bank. It is aimed is to strengthen existing clusters
towards sustainable competitive advantage through technology
upgradation/ transfer, raw material access, skill development,
managerial inputs, credit and market support.
- Khadi and Village Industries Commission (KVIC) - KVIC
implements programme for promotion of Village Industries Cluster- Rural
Industry Service Centre (RISC) for Khadi and Village Industries
activity.
- United Nations Industrial Development Organisation (UNIDO) - UNIDO
Cluster Development Programme (CDP) which is aimed 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.
- Department of Science & Technology, Ministry of Science & Technology
- Textiles Committee of India, Ministry of Textiles
- National Institute for Small Industry Extension Training (NISIET) [supported by DC(MSME)]
- State Bank of India (SBI) UPTECH Programme
- Entrepreneurship Development Institute of India
- Coir Board
Besides these central and national support institutions, some other
institutions also have their respective cluster development initiatives:
- Grameen Development Services (GDS) – Incepted in 1993, GDS
is working for the welfare and development of the poor and
disadvantaged. Its cluster development approach has been designed to
address poverty alleviation.
- Rajasthan Chamber of Commerce and Industry (RCCI) - RCCI
has about 600 corporate members. It is aimed to develop an effective
institutional framework, to modernise textile and gem and jewellery
sub-sectors, to conduct need based training programs for small
enterprises, to promote the products of SMEs, nationally as well as
internationally and to focus on environmentally sustainable development
process in the region.
Some state governments which actively adopted cluster development
initiatives include Andhra Pradesh, Gujarat, Kerala, Madhya Pradesh and
Tamil Nadu.
Some of the larger clusters in India include:
- Panipat Cluster accounts for 75% of the total blankets production in India
- A cluster in Tirupur is responsible for 80% of the country's cotton hosiery exports
- Agra cluster produces nearly 150,000 pairs of shoes per day with a
daily production value of 1.3 million dollars and exports worth US $ 60
million per year
- Ludhiana is a lone contributor of 95% of the India’s woolen
knitwear, 85% of the country's sewing machines and 60% of the nation's
bicycle and bicycle parts.
In spite of such feats and advantages, various small scale industry
clusters are experiencing significant constraints like dearth of
information, poor product quality, pitiable market linkages and
insolvent management systems.
Conclusion
In order to maintain sustainability in this ongoing liberalized era
of the Indian economy, it is essentially required that the small units
in India come up with novel approaches and ideas in the market. Here the
‘cluster development initiative’ plays a vital role as clustering and
networking among enterprises not only promotes enterprise
competitiveness but also enhances access to global markets. Hence, both
private and public sector institutions at the Central as well as the
state levels should progressively undertake and promote the cluster
development initiatives.
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