Clusters are significant to Indian economy-
A cluster is a geographical area or a location around which a number of enterprises engaged in the same or related industry or business function. Usually there may be tens or hundreds of similar or interconnected enterprises in and around an area. Sometimes there may be thousands of units in a particular cluster and it may be spread across a few kilometers also.
Surat, Namakkal, Ludhiana, Agra are examples of clusters. Clusters exist in different parts of the country, though their presence varies across states and regions. The clusters are of different sizes and types, as also their products and services. The nature and reach of the clusters also vary. There are completely village based clusters and there are urban clusters. Some of the village based clusters even supply their products to different states. Due to the unique background of the clusters in the country, the state agencies find it difficult to identify them properly and collect details.
The United Nations Industrial Development Organisation (UNIDO) had noted earlier in the late 1990s that “there are approximately 350 small scale industrial clusters and around 2000 rural and artisan based clusters contributing to almost 60 per cent of the manufactured exports and 40 percent of the employment in the manufacturing industry.” Later the Ministry of Small Scale Industries, Government of India in its All India Census of Small Scale Industries 2001-02 had estimated that there were 2042 clusters functioning in the country.
Due to reasons such as the smallness in size of the enterprises, lack of contact with institutions and the state apparatus and operations from remote and underdeveloped areas, many of the enterprises and clusters remain not formally registered with the government. As per the official details, 1223 clusters were in the registered sector functioning across 26 states and 819 in the unregistered sector covering 25 states and union territories.
There were more than 15 lakh units in clusters contributing to a gross output of Rs.42, 169 crores in the small scale industries sector during 2001-02. As a result these clusters have with them, more than one third of the total enterprises functioning in the country, covering 521 different products. Uttar Pradesh has the largest number of clusters with a total of 288 clusters, having more than 3 lakh enterprises. One could notice clusters that are engaged in the same or similar activities throughout the country. For example, there are more than 150 furniture and fixture, wooden clusters with 100 or more units in 22 states from Tamil Nadu in the south to Jammu & Kashmir in the north, and Gujarat in the west to Mizoram in the east.
Studies on clusters reveal important facts that are relevant to the understanding of our economy and businesses. Almost all these clusters are the initiatives of the local people, largely without the support from the governments and their mechanisms. Many surveys, including those by the international agencies, vouchsafe this fact. About a decade back Chadha noted this: “A recent UNIDO survey of 138 industrial clusters in India shows that only 13 of these clusters were induced by government policy while the remaining 125 grew spontaneously at the initiative of entrepreneurs themselves.”
So the efforts of the governments and their expenditure to develop the industrial and business centres called clusters are almost nil or very minimal, especially during the initial stages. On the contrary, most of the time the clusters undertake the responsibility of the state and creates the facilities required by people who live in and around them. As a result schools, colleges, temples, marriage halls, recreational centres and such other facilities needed for public utility are developed by the people belonging to the clusters.
Coimbatore is a multi-cluster centre with different clusters such as pump manufacturing, foundries, wet grinders etc., It is entirely home grown, without any investments worth mentioning by the state. Its entry and growth in several fields, connected to each other in different ways, is truly amazing. In the recent years, Coimbatore has emerged as a major educational centre in the south attracting students from different parts of the country. What is the background to it? Earlier some of the philanthropic people from among the entrepreneurial class from this cluster took up the responsibility of establishing institutions to provide education to their own local population. What were started as poly-techniques to train youngsters as mechanics and operators for the local workshops and foundries, have over the years become reputed engineering institutions turning out graduates for bigger organizations across the country.
It is interesting to note that some of the clusters have been promoting their organizations to take up tasks that the governments have failed to do for decades. For example, Siruthuli in Coimbatore has been taking steps to preserve water resources, while Valam in Tirupur is undertaking public infrastructure development. There are numerous initiatives at the family and the society levels in many of these clusters across the country, to provide what best they could to the society.
Most of the clusters are major players at the state and regional levels, while many of them have emerged at the national level and a good number at the international level. Namakkal and Sankagiri, situated in the rural backgrounds, are the top two transport clusters in the country, while the neighboring town of Thiruchengode is known across the length and breadth of the country for its rig industry. Clusters such as Surat and Tirupur have already become established global business centres.
There are two clusters namely diamond and textiles in Surat. The turnover of Surat diamond business alone exceeds Rs.80,000 crores. The contributions of different clusters in Gujarat to diamond business have helped the Indians to dominate the international diamond market in Belgium. Ludhiana is the largest centre for bicycles and spares in the world, while Bastinow in Jullundar is one of the biggest sports lanes frequented by sports personalities from all over the world.
It is important to understand that the economic development of India, to a significant extent, is driven by the clusters. Contribution of clusters is one of the major reasons for Gujarat emerging as an economically advanced state growing at a higher level. Clusters such as Rajkot, Morvi and Jamnagar, apart from Surat, have been contributing enormously to the economic and business development of the state. Studies conducted in states such as Gujarat, Tamil Nadu and Punjab show that they owe their economic progress due to the successful functioning of clusters.
What is more striking is that the regions where clusters function successfully are economically advanced, while the other regions in the same state remain without much development. The western part of Tamil Nadu is the most prosperous region of the state as it has many well functioning clusters. Parts of the state in the southern region are also richer as there are well known clusters such as Sivakasi and Virudhunagar. The regions that do not have successful clusters have not come up economically.
It is hence no exaggeration to state that the contribution of clusters to the development of economy and businesses in different parts of India is noteworthy. In most of the places it is the clusters that have driven the local economies towards progress. Therefore the clusters remain critical to the effective functioning of the Indian economy.
1. Chadha,G.K., Rural Industry in India: Policy Perspectives, Past Performance and Future Options, South Asia Advisory Team, International Labour Organisation, New Delhi, 2003
2. Fabio Russo, Strengthening Indian SME Clusters: UNIDO Experience, Case Study Project, July 1999
3. Final Results: Third All India Census of Small Scale Industries 2001-02, Ministry of Small Scale Industries, Government of New Delhi, 2004
( Yuva Bharati, Vivekananda Kendra, Chennai, Sept.2011)