The Hindu Business Line : Cluster dynamics

CLUSTERS of small and medium-scale enterprises (SMEs) have become the focus of attention of institutions such as the World Bank and the UN International Development Organisation (Unido) for their ability to contribute in a big way to poverty reduction, as they generate sufficient employment and incomes and act as a safety net for families of a large number of workers.

The multiplier effects of these clusters, in the form of spread of education, healthcare and additions to skill-enriched workforce, are also impressive.

In India, activities revolving around cashew processing in the Sindhudurg area of Maharashtra and Chanderi handlooms in Madhya Pradesh are fine examples of thriving SME clusters which have shown the spirit of enterprise and innovation, and act as agents of welcome change in social attitudes, implanting an entrepreneurial and market-oriented work-culture.

Other famous clusters are those of Agra, Ludhiana and Tirupur whose track record, both as propellants of economic growth and earners of foreign exchange, is truly breath-taking. The Agra cluster makes 15 million pairs of shoes per day with a production value of $1.3 million and exports shoes worth $57.14 million per year. The Ludhiana cluster makes 95 per cent of the country's woollen knitwear; 85 per cent of sewing machines and 60 per cent of bicycle and bicycle parts.

The Tirupur cluster accounts for 90 per cent of the cotton knitwear exports of the annual value of $800 million and more.

Outstanding as their performance is, there are certain important aspects of what may be called cluster dynamics which are yet to be fully recognised: First is the unobtrusive and effective way they are achieving gender equality and gender empowerment. The sizeable participation of women has led to their acquiring familiarity with production methods, intricacies of market forces, and techniques of mobilisation of credit (especially through self-help groups).

Second, the involvement of whole families helps in the wide dispersal of skills and capabilities from one generation to another which, in the process, gain in sophistication by upgrading themselves.

Third, it is becoming evident that rich dividends are to be had from the synergy resulting from a combined effort of civil society, panchayati raj institutions and SME initiatives.

Fourth, by means of the external linkages they cultivate, the local clusters become an integral part of global value chains opening up trade, finance and production channels in a mutually reinforcing fashion.

B. S. Raghavan

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