Cluster Financing

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CLUSTER FINANCING

Definition of Cluster in the Indian Context
Clusters can be defined as Sectoral and geographical concentration of enterprises, in particular Small and Medium Enterprises (SME), faced with common opportunities and threats which can: a. Give rise to external economies (e.g. specialized suppliers of raw materials, components and machinery; sector specific skills etc.); b. Favour the emergence of specialized technical, administrative and financial services; c. Create a conducive ground for the development of inter-firm cooperation and specialization as well as of cooperation among public and private local institutions to promote local production, innovation and collective learning.

Importance of Clusters in the Indian Context
With a contribution of 40% to the country's industrial output and 35% to direct exports, the Small and Medium Industry (SME) sector has achieved significant milestones for the industrial development of India. Within this sector, an important role is played by the numerous clusters that have been in existence for decades and sometimes even for centuries. India has the richest diversity of clusters. The clusters are categorized as: Artisanal Clusters

Industrial Clusters

The products covered by artisanal clusters include textile, handlooms, handicrafts, woodcrafts, metal and stone crafts, jewellery, leather, pottery & clay, etc. The industrial clusters include processed food, rice milling, readymade garments, terry towel, wet grinder, engineering, machine tools, handtools, foundry, brass parts, rubber and pharmaceuticals cluster.

There are more than 6500 industrial, artisan and micro enterprise clusters2. These clusters represent the socio economic heritage of India, where some towns or villages are known for a specific product for decades and centuries. It is estimated that these clusters contribute 60% of the manufactured exports from India. The clusters in India are estimated to have a significantly high share in employment generation.

Cluster Development Initiatives in India
Several institutions in India have taken up Cluster Projects besides various government initiatives. They have been involved in promoting Small-Scale and Cottage Industries, and Regional Cluster Development by removing policy impediments; financial support; technology, skills and quality upgrading; market support and improving links between small and large firms. Some of the institutions working in this area are:

Central Government
SICDP Cell, Development Commissioner (SSI), Ministry of Small Scale Industries National Small Industrial Corporation Ltd (NSIC)
Development Commissioner (Handicrafts), Ministry of Textiles Department of Science & Technology, Ministry of Science & Technology Textiles Committee of India, Ministry of Textiles
Khadi and Village Industries Commission (KVIC)
Coir Board

National Support Institutions
Small Industries Development Bank of India (SIDBI) Technology Upgradation Programme State Bank of India (SBI) UPTECH Programme
National Bank for Agriculture & Rural Development (NABARD)

International Agencies
UNIDO
MSME
WASME

SOME SME CLUSTERS COVERED BY EXISTING
SIDBI BRANCHES
Sr. No. Branch Offices No.of SSI clusters Product
1 Hyderabad 5 Ceiling Fan, Electronic Goods, Pharmaceuticals- Bulk Drugs, Hand Pump sets & Foundry 2 Patna 1 Brass and German Utensils
3 Delhi 19 Stainless Steel Utensils & Cutlery, Chemicals, Electrical Engineering Equipment, Electronic Goods, Food Products, Leather Products, Mechanical Engineering Equipment, Packaging Material, Paper Products, Plastic Products, Wire Drawing, Metal Fabrication, Furniture, Electro Plating, Auto Components, Hosiery, Readymade Garments, Sanitary Fittings 4 Ahmedabad 17 Pharmaceuticals, Dyes & Intermediates, Moulded Plastic Products, Readymade Garments, Textile Machinery Parts, Diamond Processing, Machine Tools, Castings &...
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