By Mukesh Gulati, presented at the 19th TCI Global Conference, Eindhoven, 2016

1. Titel presentatie
[Naam, organisatienaam]
Summit Day – The international perspective on clusters and their physical location
Mukesh Gulati
Executive Director, Foundation for MSME Clusters
How SME clusters in India
respond to the rapid changes in
today’s world

2. How SME clusters
in India respond to
the rapid changes
in today’s world
Mukesh Gulati
Executive Director
Foundation for MSME Clusters (FMC)
ed@msmefoundation.org

3. 34%
Contributi
on 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)

4. 44.08
Construction
19.97
Transport &
Storage
43.53
Retail Trade
48.28
Non
Manufacturing
50.74
Manufacturing
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)

5. 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

6. “
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 Clusters
Concept 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, BDS
Govt. role: To reduce and supplement/ complement
Individual subsidies to group based support

7. 7 Rapid Changes
Impacting the
MSMEs Clusters
The Macro Scenario

8. 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

9. 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

10. 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

11. 3. Burgeoning gap in Skill
7%
Organized
Sector
93%
Unorganiz
ed 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)

12. 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

13. 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

14. 5. Access
to Social
Security
Systems
-Targeting
Unorgaised
sector
workers
Atal Pension Yojana : 1.6 million
subscribers till January 2016
1.9 million subscribers
Pradhan Mantri Suraksha Bima
Yojana
91 million subscribers
Pradhan Mantri Jeevan Jyoti Bima
Yojana
28 million subscribers
Source:
http://www
.pradhanm
antriyojana
.co.in/

15. 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

16. Response…….
Tirupur knitwear Dyeing-
Zero Liquid Discharge
among Dyers
Ambur/Vaniyambadi Leather
Ludhiana Textile
Dyeing
Belgaum Foundry: Sand
Reclamation

17. 7. Access to Alternate Sources of
Energy
Target 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

18. 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

19. 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.

20. Thank You
www.fmc.org.in
www.clusterobservatory.in
We assist institutions undertake effective and inclusive cluster based
local area development initiatives