Background

Micro Small-scale and Medium Enterprises (MSMEs) play an important role in the Indian economy. Planners and policy makers have always been on the look for effective policies to strengthen the MSMEs sector. The Industrial Policy of July 1991 however marked a conscious shift from the regulated and controlled policy to a liberal one. As a result, development institutions are looking for new ways to increase the reach and effectiveness of services such as information, counselling, training, finance, and industrial infrastructure and technology transfer. New initiatives are being launched in the areas of: a) strengthening the policy framework, b) building up private sector capabilities in MSMEs promotion, and c) identifying innovative programmes for MSMEs promotion. The cluster development program is an innovative MSME support initiative that targets MSMEs clusters with the purpose of upgrading their capacities to respond to the challenges created by the increasing liberalisation of the Indian economy

 Cluster development- Objectives

·         Strengthen linkages within the cluster – with other MSMEs, larger enterprises, support institutions, local government, banks, business schools, etc.;

·         Assist cluster stakeholders to develop a consensus-based vision for the cluster  as a whole;

·         Help stakeholders to coordinate their actions and pool their resources to move towards a shared vision for the cluster as a whole; and

·         Create an autonomous governance framework, in a step-by-step process that will sustain dynamism and change in the cluster after the withdrawal of the implementing agency.

 Need for implementing agency

Attaining these objectives requires external assistance in the form of sensitisation, trust building, conflict resolution, network creation, etc. Agencies are unlikely to undertake such activities since the outcome is so uncertain that they are unlikely to be profitable in the short term, and the beneficial effects are freely available to all the cluster stakeholders, so that it is nearly impossible to price them adequately.

Need for Cluster Development Agent (CDA)

There is a full time CDA in the cluster appointed by  the implementing agency to work in the cluster for a fixed time period.

 Steps involved in Implementation

·         Selection of clusters: A judicious selection based on the cluster's importance, promotability,  viability and sustainability helps to ensure an effective and wide-reaching impact. This ensures that the available resources are concentrated on clusters where the approach has the greatest likelihood to be a success by contributing to the profitability of the MSMEs, the revitalization of systemic interactions, the dissemination of best practices, etc.

·         Diagnostic study: Implementation of the cluster development initiative starts by gathering information about the cluster in a strongly participatory manner: constraints faced by the stakeholders, untapped potential; local linkages and support mechanisms. The participatory process helps to build initial trust with the local stakeholders (who are the clients). 

·         Trust building: Establishing an atmosphere of trust within a cluster is an essential prerequisite to earn the support from those involved in the cluster. Here the CDA must first develop “bilateral” trust with individual stakeholders and then use it to create/enhanced trust among these. This starts with informal/formal interactions and later takes the route of trust building through participation in activities.

·         Action plan: This list of activities (generally for a year) which is more than the sum total of demand from the different cluster stakeholders starts with inputs from the diagnostic study. It is a roadmap that will help foster relationships among the stakeholders while delivering visible results. It is also an attempt to embody the vision for the cluster as a whole in a set of activities that can be implemented through stakeholder collaboration. Action Plan is made annually.

·         Implementation: This is not simply the realisation of the targets set, but involves a radical change in the way the cluster actors interact and conduct  activities. The responsibility for implementation of various activities is progressively shifted to the stakeholders, particularly those in the private sector, with support from local institutions. In the implementation of the action plan the stakeholders discover the advantages of closer cooperation. Joint activities with intermediaries also enhances their capacity and strengthens the governance structure of the cluster.  

·         Monitoring and evaluation: Monitoring of the quantifiable and qualitative outcomes of implementation helps to disseminate best practices and strengthen trust among stakeholders. It also allows the identification of  emerging changes in the relationships among cluster stakeholders and the adaptation of cluster activities and governance structures to these.