SOIL Report 2008 - ACCESS Development Services

Possibilities: Livelihood Opportunities and PotentialThe key elements of the methodology are selection of clusters, undertaking a participatory diagnosticstudy of the cluster, breaking the barriers of mutual mistrust in the clusters through a range of pilotinitiatives, drawing up a cluster-focused action plan and implementing it by the local actors with supportdrawn from the public and private support institutions. Building various associations of producers, BDSservice providers and such other related parties also plays an important role.As spatial livelihood opportunities, we see that if there are a group of enterprises of similar nature withina geographical confine there is a potential to develop a cluster around it. (See Box 4.1 for a classification ofclusters). The thinking on growth of micro and small-scale industries through cluster-based developmentis a fairly recent phenomenon. It started with the State Bank of India (SBI) initiative in 1989 and wassoon followed by the Small Industries Development Bank of India (SIDBI) in 1991. In 1997 the AbidHussain Committee recommended “… clusters as the centerpiece. Such clusters can lower transactioncosts, help realise informational economies and lower the costs of credit surveillance.” Some of the keyinstitutions involved in cluster development include Development Commissioner, (SSI), Ministry ofSmall Scale Industries, Development Commissioner (Handicrafts), Ministry of Textiles, Department ofScience & Technology, Ministry of Science &Technology, Textiles Committee, (Ministry of Textiles),Khadi and Village Industries Commission (KVIC) (Ministry of ARI) and Coir Board. Some of the NationalSupport Institutions taking up cluster initiatives are (SBI), SIDBI, NABARD and National SmallIndustries Corporation (NSIC). Among the state governments Andhra Pradesh, Gujarat, Kerala andMadhya Pradesh have also launched cluster development initiatives.Classification of Clusters:Box 4.1a) Horizontal clusters: This type of cluster is characterised by units which process the raw materialto produce and subsequently market the finished product themselves. Some examples are sportsgoods in Jalandhar and agricultural pumps cluster in Coimbatore. This may indicate the individualisticapproach to business in clusters or no scope for division of units, as the different stages ofproduction are confined to a unit itself.b) Large Unit-based : A cluster which is established around a large unit or a few large units is calleda large-unit based cluster. The relationship that exists between the small and the large units could bebased on supply of some of the critical raw materials from large enterprises or on their working assubcontractors to the large firms which means they are either backward-linked or forward-linked.Development of a cluster of ancillary units is one of the examples of large uni- based clusters.c) Vertically integrated clusters: In vertical clusters the operations required in producing thefinished product are divided and are carried out separately by different units, most of which areessentially SMEs, in order to distinguish from the large uni-based clusters.A large number of clusters exhibit a mixed character, combining attributes of a large-unit, as wellas those of vertical integration etc.Interdependence:There is a high degree of inter-dependence among the small firms in the vertically integratedclusters. This is usually witnessed in the case of hosiery, textile processing and metal products, inall of which it is possible to split the production process and farm out to separate firms due to thenon-perishable character of the product. Second, this becomes feasible if it requires a degree ofspecialisation for each of the processes involved. This phenomenon may also be witnessed due tosplitting up of units to remain small for easy management, for escaping labour regulations that comeinto force when the firm grows to become large and/or to enjoy the policy-related advantages thatthe small firms are entitled to.The keyelements of themethodologyare selectionof clusters,undertaking aparticipatorydiagnostic studyof the cluster,breaking thebarriers ofmutual mistrustin the clustersthrough arange of pilotinitiatives,drawing up acluster-focusedaction plan andimplementingit by thelocal actorswith supportdrawn fromthe public andprivate supportinstitutions.97