SMEs clustering strategies - India case study

National Institute for Micro, Small and Medium Enterprises

WELCOME


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Mohammad Thoriq Bahri - K. Surya Prakash Goud National Institute of Micro, Small and Medium Enterprises (ni-msme)

Yousufguda, Hyderabad - 500 045 9908724315 [email protected], [email protected] , [email protected]

SME Clusters – Concepts & Methodology

India Case Analysis


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• India is endowed with a number of indigenous enterprise clusters• Predominantly occupational, artisanal and rural in nature• Emergence of manufacturing, hi-tech and service enterprise clusters

in post-independent era• Largest number of clusters in the world : 7200

• Manufacturing – 1200; Artisan–6,000• Accounts for about 45% of the manufacturing output • 40% of total exports of the country• Employ about 69 million persons in over 26 million units • Around 6000 products ranging from traditional to high-tech items• Nearly 50% of the MSMEs are owned by disadvantaged groups of

society

Significance of MSMEs & Clusters in India


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• SBI’s Project UPTECH - 1988• UNIDO’s Study - 1996• Cluster development programme (CDP) by UNIDO – 1997• Policy recommendation by Abid Hussain Committee - 1997• Ministry of MSME (MSE – CDP) initiated cluster approach – 1998• Textile Committee of India – 2002- 03• NABARD’s Cluster Development Programme – 2003-04

Development of Cluster Strategy: Major Initiatives


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• Ministry of Commerce and Industry (IIUS)–2004-05• Ministry of MSME (SFURTI) – 2005-06 • SIDBI – World Bank (PMD) – 2005-06• Ministry of Textiles (IHCDP), DC (Handlooms) – 2005-06 • Ministry of Textiles – Scheme for Integrated Textile Parks –

2005-06• NMCC, NCEUS : Traditional Manufacturing – 2006-07• Efforts state governments (Kerala, M.P., Orissa and

Rajasthan) – 2003-05

Development of Cluster Strategy: Major Initiatives


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Status and Support to Clusters

• Accelerated cluster development with the initiation of Ministries of MSME & Textiles – 2003

• Emergence of NRCD at ni-msme with the support of DC, MSME – Jan.2004

• Ministries of Government of India involved : MSME, Textiles, Industry and Commerce, Rural Development, Tribal Affairs, Food Processing and Dept of AYUSH

• Financial and support institutions involved: SBI, SIDBI, NABARD, NMDFC, NEDFI and NMCC

• No. of Schemes/Programmes in operation – 26


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Initiatives of International Agencies

• ILO - Small Enterprise Development (Handicraft) – 2000

• SIDBI - Business Development Service for SMEs – 2005-06 (World Bank, DFID, GTZ, KFW)

• UNIDO - Consolidated Project for SME Development in India – 2007

• GTZ - SME Financing &Development


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• Sectoral and geographical concentration of enterprises• With a clearly identifiable product and place• Faced with common opportunities and threats• Includes support firms, service providers and institutions• Has mutual inter-linkages (strong or weak)

What is a cluster?


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Cluster – A Linked system

FIRM FIRM

FIRM

FIRM FIRM

Backwardlinkages

Machinery supplier

Raw Material Supplier

ForwardLinkages

SellingAgents

DirectCustom

SUPPORT INSTITUTIONS

BDS PROVIDERS

ENVIRONMENT


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Stakeholders of a Cluster

• Principal manufacturing firms

• Support firms & institutions

• Marketing agents and consumers

• Service providers

• Interest groups

Stakeholders have a business interest in the cluster and include:


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Models of Cluster Development

• Area Development• Group approach (Group of Artisans)• Group approach (Group of Enterprises)• Creation of New Enterprises (Based on availability of raw

materials)• Creation of New Enterprises (Based on availability of Man

Power)• Multi Product Clusters • ……. In India UNIDO methodology


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Why Cluster Development?• Enables reaching out to a large no. of enterprises• Economies of operation • Collective efficiency• Critical infrastructure development• Creates environment for mutual learning• Focuses on the felt needs of the enterprises• Unique opportunity to address specific needs with specific

solutions• Environmental compliance• Productivity, employment generation, poverty reduction• Strong support from other institutions


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Which Cluster to Focus?

• Distinct product & technology• Introduction of new technology• Potential for survival & growth• Sizable enterprises• Contribution to employment• Local leadership & support• Basic infrastructure• Presence of capable institutions• Rural institutional networking• Need for socio-environmental interventions


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Cluster DevelopmentFundamental Principles

• Demand-based • Targeted at group not individual • People (cluster stakeholders) participation • Interventions through targeted joint action • Holistic in nature (pressure points)• Fostering social capital


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Cluster Methodology

• Identification of clusters• Selection of clusters• Selection of cluster development agent• Diagnostic study• Trust building• Preparation of action plan for intervention• Approval of action plan by funding agencies• Implementation of action plan• Handholding and monitoring• Exit


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Cluster Development Programme:A Loop Approach

Diagnostic study

Trust building

Action plan

Implementation

Monitoring and Evaluation

• Full time CDE• Group led• Role of BDS• 3-4 years’ time• Pressure point as entry• Holistic thereafter


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Focal Issues

• Common problems and threats• Government policies & programs in operation• Trust & vision building• Skill assessment & training needs• Status of raw materials, availability of finance• Technology upgradation• BDS providers• Network development• Infrastructure Development • Social factors


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1Commercial

Benefits

1. Enhanced chances of securing larger contracts

2. Greater bargaining power with customers

3. Greater presence in the market place

4. Guidance from experienced larger companies with shared risks

2Economic Benefits

1. Sharing & Pooling of resources

2. Sharing Business Development & Operating Costs

3. Access to New Technology

4. Infrastructure creation

3Environmental

Benefits

1. Aids in decongesting units from urban areas

2. Ensures that environmental safety standards

3. Various forms of pollution always under check

4Social

Benefits

1. Employment generation

2. Compliance to trade related barriers

3. Ensures enhanced security

4. Eradication of social evils

Expected Results

The Need


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• Brass & Bell Metal Products, Hajo, Assam• Surgical Instruments, Baruipur, West Bengal• Auto Components, Jamshedpur, Jharkhand• Brass Utencils, Pareo, Bihar• Gun, Munger, Bihar• Wet Grinder, Coimbatore, T.N• Foundry, Belgaum, Karnataka• Fan, Hyderabad, Ap• Wooden Furniture, Srinagar, J&K• Cricket Bat, Ananthnag, J&K• Pharma, Goa• Pharma, Thane, Maharashtra • Rice Flakes, Ahemedabad, Gujarat• Pharma, Indore• Sewing Machines, Ludhiana, Punjab• Readymade Garments, New Delhi• Rice Milling, Karnal, Hariyana• Pottery, Chunar, UP• Surveying Instruments, Roorkee, Uttranchal• Cotton Hosiery, Kanpur, UP

20 DC MSME Clusters


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Cluster Approach Co-optetion


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Major activities of NRCD at ni-msme (2003 –till date)

• Training, hand holding and monitoring of 20 MSME clusters sponsored by Ministry of MSME

• Organised orientation programmes for Directors of MSME-DIs, CDEs, nodal agencies, implementing agencies and Bank Officials (NABARD, Canara Bank & OBC)

• Implemented MSE_CDP project in Narsapur crochet lace cluster• Organised awareness programmes on cluster development for officials of 10

state governments• Providing services as implementing agency-Mubarakpur, Barabanki under

IHCDP • Providing services as technical agency in 22 clusters under SFURTI (6 khadi,

4 village and 12 coir clusters)• Implemented Soft interventions in Agra leather cluster• Organised Training Programmes for CDEs and other officials under IHCDP,

SFURTI, MSE CDP


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• Assisted• MSME foundation• Cluster twinning project of UNIDO

• Conducted diagnostic study of 30 clusters (21-UP, 7-TN and 2 AP)• Prepared business plans for 10 handicrafts clusters• Organised National Workshop on Cluster Development (National & International Agencies, UNIDO, SDC, GTZ, SIDBI, NABARD, MSME Foundation

etc.,) • Publications and films

• SME Cluster Development - a Training manual • Interventionary Instruments for Cluster Development – a hand book• MSME Cluster News bulletin (Half yearly)• Initiatives for development of MSE clusters – a film• Interventions in SFURTI Clusters



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• Interactive Workshop for Development of Coir Clusters under SFURTI

• Evaluation of AHVY Scheme• Cluster Mapping in the State of Jharkhand • Awareness Programme for Municipal Officers/NGOs (Cluster

Approach for Urban Poverty Alleviation)• Survey of Herbal Clusters (Ratnagiri, Padubidri & Trissur)• Survey of Textile Clusters (Solapur, Bhiwandi & Malegaon) • Workshop on Innovation & Infrastructure Development• Workshop on Development of Innovative Clusters • Training of Cluster Stakeholders of Maharashtra


THANK YOU

Economy & Finance

SMEs clustering strategies - India case study