Titel presentatie[Naam, organisatienaam]

Summit Day – The international perspective on clusters and their physical location

Mukesh GulatiExecutive Director, Foundation for MSME Clusters

How SME clusters in India respond to the rapid changes in

today’s world

How SME clusters in India respond to the rapid changes in today’s world

Mukesh GulatiExecutive Director

Foundation for MSME Clusters (FMC)

ed@msmefoundation.org

34% Contribution to GDP

MSMEs in

India

45% - Total Industrial

Output

40% - Total Exports

The Growth Engine of our Economy-49 million enterprises-98% are micro & 99% unregistered-111 million employed

Source: MSME Annual Report

(2014-15)

(Excluding Sectors: wholesale/retail trade, legal, educational & social services, hotel & restaurants, transports and storage & warehousing)

44.08Construction

19.97Transport &

Storage

43.53Retail Trade

48.28Non Manufacturing

50.74 Manufactur-ing

Indian Employment Scenario (93% employed in the Unorganized sector, excluding agriculture) Number of

Workers in Million Source:

Turnaround in India’s

Employment Story, EPW

(2013)

Relevance of Clusters for India ▹ Very large number of Manufacturing clusters (~

6,500) covering ~ 70% MSMEs▹ Industrial (1150), Handlooms (400),

Handicrafts (3000), Rural industries (2000), 70% in clusters

▹ Agricultural (NA) and Services clusters (NA)

▹ 8 National Ministries and 30 states promote clusters. More than 3500 cluster initiatives since the year 2000

▹ 12th Five Year Plan- MSMEs (2012-17) with 14 cluster focused schemes with an allocation of (~3 billion USD)

Source: Various

Ministries’ Websites

“

Evolution of CD in India.1991: Economic Liberalisation

MSMEs removed from protection against large enterprises Capital & other subsidies significantly done away with

1996: UNIDO First ever attempt to Mapping of Manufacturing ClustersConcept of cluster development methodology

1997: Abid Hussain Committee Report on MSME development

Cluster approach to be central principle of public policy Role of Private Sector: BMOs, BDSGovt. role: To reduce and supplement/ complementIndividual subsidies to group based support

7 Rapid Changes Impacting the MSMEs ClustersThe Macro Scenario

1. Technology : Mechanization of Low end processes

Textile manufacture i.e. Cotton picking, ginning, spinning, weaving, processing and garment making, resulting in

gains in productivity & efficiency but also loss of jobs in handicrafts, handlooms and small industries

354 mn (2015) to 500 mn. (2016) internet users

E-Commerce ▹ 6.3% share $38 bn/600 bn

(2016) to ▹ 11.8% share $100 bn/850 bn

(2020)

14 million retail outlets with 40 million people employed (3% of population)

2. Advent of Digital Technology : E-Commerce

Source: KPMG-Snap deal Report on E-Commerce in India

E-Commerce players focus on SME growth

Source: KPMG-Snap deal Report on E-Commerce in India

Several retail stores are losing out to e-commerce players while other MSMEs are connecting with them to improve their sales and awareness

3. Burgeoning gap in Skill

7%Organized

Sector

93%Unorganized

Sector

• 7% in the employment is Organized Sector (of which 56% is contracted labour)

• 53% of all informal employment is Own Account Enterprises (OAEs)

• Only 3-4% of the total workforce is said to be skilled (certified)

Percentage of Workers

Source :CII Report (2014)

Skill Development Initiatives

The Santiniketan

Leather Cluster

• Institutional BDSPs linked with the cluster for capacity building programme, marketing training and design innovation respectively.

The Ganjam Cashew Cluster

• A 3-month certificate course developed with BMO and implemented on Cashew processing by local govt. training institute

Livelihood Generation in

Rajasthan• New

livelihood promotion among women initiated through a market led skill development program with CSR funding support

4. (Non)Availability of Institutional Finance• Gap in mid level financing (~USD 800 to 17000)

Informal lenders. Deficit: 8% have access to institutional credit. Banks & MFIs

• New policy initiatives for financing being encouraged. MUDRA bank re-financing but outreach is low. 10 Small finance banks. Hundreds of NBFCs getting into enterprise lending. SIDBI Udyami mitra as digital technology based aggregator.

• Several small technology based start-ups as linkers and finance providers are reaching out to cluster based financing. BMOs/ Suppliers are enablers in some cases.

Source: IFC Report

5. Access to Social Security Systems-Targeting

Unorgaised sector

workers

Atal Pension Yojana : 1.6 million subscribers till January

20161.9 million subscribers

Pradhan Mantri Suraksha Bima Yojana 

91 million subscribers

Pradhan Mantri Jeevan Jyoti Bima Yojana 

28 million subscribers  Source: http://www.pradhanmantriyojana.co.in/

6. Rising Environmental Concerns and Response

• Rising awareness and more Stringent Regulations leading to demand for better technology, technical expertise, equipment financing and training requirements for energy efficiency, emission reduction and end of pipe treatment using several public schemes for clusters

Response…….

Tirupur knitwear Dyeing- Zero Liquid

Discharge among Dyers

Ambur/Vaniyambadi Leather

Ludhiana Textile Dyeing

Belgaum Foundry: Sand Reclamation

7. Access to Alternate Sources of EnergyTarget for renewable energy generation of 175 Giga Watts by 2022

Industrial Estate at Vapi in Gujarat 

ALEAP Green Industrial Park in Nandigama near Hyderabad

(Telangana)

Integrated Industrial Estate of SIIDCUl at Haridwar

Way Ahead

1. Digital Technology as enabler to solve problems of access to capital (Udyamimitra); e-commerce platforms (USD 50), public procurement, efficiency, organising production and aggregating marketing among small enterprises in clusters. Ola, Ubers for transportation

2. Strengthening conventional clusters: Improved coordination of resources and cooperation through BMOs, BDSPS and Academic Linkages. Avoid fragmentary support initiatives (Hard/Soft) and enable coordinated scaled up initiatives with massive outreach

Way Ahead

3. Beyond conventional clusters in potentially new areas: Aggregating villages around small towns with multi-products (‘100 mile’ clusters), rural/urban tourism, green infrastructure, MSME supply chains and virtual clusters

4. Objective of Cluster Development from productivity enhancement to new job creation, improving quality of jobs (OHS/social security) and access to finance  

5. Strengthening the Monitoring and Evaluation Framework to analyze the work done and the outputs achieved.

Thank Youwww.fmc.org.in

www.clusterobservatory.inWe assist institutions undertake effective and inclusive cluster based

local area development initiatives