MSME Clusters

Micro and Small Industries Sector is the strong employment providing source of our country. Medium Industries also to some extent fall under this category. In general, MSMEs contribute to employment generation and poverty reduction in any developing country. Moreover, by virtue of its existence in a wide spread area, the distribution of wealth and opportunity are also made available in distributed fashion. In view of this, MSMEs are getting focussed attention and support from Government. This is a universal fact and not only in India.

Despite this, MSMEs as standalone units are nowadays experiencing difficulties some of them are listed below:

  • No bargaining power in purchase of raw material and hence unable to get inputs at lower rates.
  • Unable to compete in tenders due to their low sales turnover and plant capacity even though they are capable of producing goods at lower cost.
  • Not able to enter international market due to non-maintenance of homogenous standard products with regular supply in bulk quantity
  • Due to smaller size investment and labour force, they are not able to provide even need based skill trainings to their employees.
  • Not able to have teams to make study on market intelligence, technology usage etc.
  • Due to limited funds not able to maintain any Research and Design division and hence face difficulty in competing with market changes.
  • Issues in raising funds for installing machinery required to overcome environmental and safety problems.

Based on the study at developing and developed countries, it is proved that cooperative relations and joint action are more likely when enterprises operate in proximity and share business interests such as markets for products, infrastructure needs or challenging external competition.

This ‘Clusters’ formation has made the enterprises’ joint initiatives stronger because of more cost-effectiveness due to shared fixed costs and easier to coordinate, with proximity fostering mutual knowledge and trust.

On 17 November, 1966, United Nations Industrial Development Organization (UNIDO) was formed as an autonomous body within the United Nations. Its mission was to promote and accelerate the industrialization of developing countries. As on date, UNIDO is the specialized agency of the United Nations that promotes industrial development for poverty reduction, inclusive globalization and environmental sustainability.

16th June 2016 ‘The Micro Small and Medium Enterprise Act’ was passed to facilitate the promotion and development and enhancing the competitiveness of MSME units.

The Ministry of Micro, Small and Medium Enterprises (MSME), Government of India (GoI) has adopted the cluster development approach as a key strategy for enhancing the productivity and competitiveness as well as capacity building of Micro and Small Enterprises (MSEs) and their collectives in the country.

Clustering of units also enables providers of various services to them, including banks and credit agencies, to provide their services more economically, thus reducing costs and improving the availability of services for these enterprises.

The following web sites give more useful information on Clusters and support to clusters by Government:

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