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Definition of Clusters

A cluster is defined as a concentration of enterprises producing same or similar products or strategic services and is situated within a contiguous geographical area spanning over a few villages, a town or a city and its surrounding areas in a district and face common opportunities and threats. Accordingly, we have not considered activities which are of daily use services and/or where scope for joint action or passive cooperation is minimal or where the product grouping is too wide for common threats/opportunities to emerge. Clusters may be broadly divided into the following broad categories:

Industrial cluster: Having at least 100 enterprises and/or a minimum turnover of Rs.100 million. Units in these clusters are functioning from factory premises with hired workers. Such clusters have a mix of micro, small, medium, few large and at times all micro units. 

Micro-enterprise clusters: Such clusters are all micro units and are mostly done by household based units by mostly utilising home based workers. These include artisanal (handicrafts and handloom) and other micro enterprise clusters. A handloom cluster has a minimum of about 500 looms and that of handicrafts and other microenterprise clusters is estimated to have around 50 units.

Methodology: Globally there are two methods of cluster identification viz. statistical method and primary method. Literature on cluster identification methodology also supports the combination of both methods because of the limitation of both the methods. Most industrially developed countries, particularly USA, UK and Italy have used statistical methods that tend to measure the sectoral and geographical intensity of enterprises drawn from national statistics available about enterprises. The challenge of most developing countries is the lack of such data, further accentuated by high level of informal economy making it extremely difficult to reach verifiable numbers.

Second challenge is that there is no law that recognizes and defines clusters in terms of the number of enterprises, scale of output and the geographical boundaries considered sufficient to contain the number of enterprises. Considering the wide typology of enterprises in terms of their size, technology used, market accessed and most important the intent to provide public support through a large number of Ministries, some parameters about clusters have been fixed to draw administrative criteria for provision of public assistance. For example, clusters in India have been segregated based on whether the looms used for weaving fabric are hand operated because this industry is supported by a national department of handlooms. Another set of clusters called ‘Khadi’ clusters that are supported and regulated through ‘Khadi Village Industries Commission’ are those where the fabric is made using hand spun and hand woven yarn. A separate national department is responsible for handicrafts, another one for coir industry and yet another one for information technology based enterprises. Finally, there is a full national commissionerate to support micro, small and medium enterprises (MSMEs) under national ministry of MSMEs that has a number of enterprises overlapping with other typologies. Census often made by different departments are made using different criteria and at different times thus making aggregation extremely difficult.

So the option that we were left with was to draw upon available statistical information, cluster level studies, source opinions from knowledgeable people including policy makers, funding institutions, regulators, credit providing organizations, development agencies and business membership organizations. Cross verification of the analysis made and numbers formed have therefore taken more than 14 years since 1996 when the first attempt to this effect was made in the context of India. Thereon, the numbers and diversity has increased to unearth a rich and wide variety of congregations of enterprises that Indian smaller enterprises are made of. The work even after 14 years can be called as ‘work in progress’ and this observatory makes a humble attempt to document what is available so far that hopefully will provide insights to what can be done to freeze the picture at a given point of time and what more may be undertaken in future.      

Evolution: The process of identifying clusters in India started with UNDP project (TSS 1) implemented by UNIDO 1996. This publication was authored by Mr. Mukesh Gulati at present Executive Director of Foundation for MSME Clusters. This publication identified 138 industrial and 1657 artisanal clusters. This list of industrial clusters also found place in the Abid Hussian Committee report published in 1997.

Thereafter the list was gradually increased to 338 industrial clusters and approximately 2500 artisan clusters under the auspicious of the four UNIDO projects – US/GLO/95/144, US/IND/97/148, US/GL/02/059 and US/IND/01/193 executed during the years 1997 to 2005. During these projects the UNIDO team interacted with number of informed persons (representative of industry associations, State Government Directorates of Industries & Crafts, their District Industries Centres, other technical institutions, the then office of Development Commissioner, Small Scale Industries (DCSSI) and its regional offices Small Industries Service Institutes (SISIs), etc. The information was collected both by seeking information directly and also during the various cluster development training programmes that UNIDO conducted since the year 2000 directly as well as with other institutions like Entrepreneurship Development Institute of India (EDII) Ahmedabad, Indian Institute of Entrepreneurship (IIE) Guwahati, NISIET (now National Institute for Micro, Small and Medium Enterprises NIMSME) Hyderabad, Kerala Bureau of Industrial Promotion (K-BIP) Thiruvananthapuram. Data was also shared with DICs/SISIs and response was incorporated wherever possible. This helped the list of industrial clusters to grow up to 338 by the year 2004/2005. During these projects, UNIDO also collected number of reports and census document on handicraft and handloom clusters and thus a list of around  2500 handicrafts clusters and 535 handloom clusters was also created.

By the year 2008, a chain of UNIDO projects came to a close and before that the Foundation for MSME Clusters was created at the suggestion of the Govt. of India and technical support of UNIDO, in the year 2005. The Foundation planned in the year 2009 to update the available list of clusters compiled under the UNIDO string of cluster projects. The Foundation has for over the period 2008-11, did the following to update the resources with financial support drawn from the project ‘Promoting Innovation Clusters in India’ funded by Department of Science & Technology, Ministry of Science & Technology, Govt. of India:

1. Interact with the office of DCMSME to get access to the list of clusters and diagnostic studies undertaken under their ongoing scheme of assistance MSECDP (Micro, Small Enterprises Cluster Development Programme).  Here the All India Census of SMEs undertaken in the year 2003  by the office of DCMSME was also helpful to identify the industrial clusters.
2. Interact with various State Governments during the process of training that the Foundation provided to their teams and gathered knowledge about more clusters along with their details. During this process the Foundation has interacted with the state governments of West Bengal, Kerala, Haryana and also with various institutions which have regional presence including the NIMSME, KBIP, EDII, IIE, Cane and Bamboo Technology Center (CBTC) etc. Apart from this the Foundation also interacted with the representatives of over 150 associations all over India and gathered intelligence from them regarding the presence of clusters.
3. The Foundation also got useful information from a number of other financial  institutions particularly, Small Industries Development Bank of India (SIDBI), National Bank for Agriculture and Rural Development (NABARD) 
4. Information was also verified with net based survey and feedback received internally from the four regional offices of the Foundation. The Foundation also did primary survey of the clusters of Orissa undertaken in the year 2008 with support from interns drawn from Indian Institute of Forest Management
5. It may be mentioned here that this portal has data about the estimated number of firms in the clusters and/or estimated gross financial turnover for around 60% of industrial clusters. Similarly there is already a confirmation about the estimated number of looms in over 80% of the handloom clusters. Similar information for handicraft clusters is in the range of 25% of clusters. At times it is also not sure as to whether the figures available are number of artisans or household units. However we have retained all cases where no further data is available, to verify it at some later point of time.
6. In most of the cases these clusters are spread over a place – a city/few villages/contiguous blocks of a district. Such data are based on diagnostic studies undertaken by various institutions who have undertaken primary sample based surveys for cluster analysis. But in cases of secondary data from other sources, identification of units in a district has also been considered as a cluster. These clusters need to be verified as clusters as and when cluster diagnostic studies shall be undertaken.