CLUSTER DEVELOPMENT

Learning and Way Forward

Dr A K Krishna KumarExecutive Director

Manufacturing set to be the key driver of India's growth strategy Manufacturing set to be the key driver of India's growth strategy over the next decade…over the next decade…

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Manufacturing and manufacturing alone can absorb all those who need better livelihood opportunities…

“”

Dr Manmohan SinghHon’ble Prime Minister of India

It is proven that manufacturing creates long-term sustainable economic growth and also drives the growth of the services sector…

SMEs form the backbone of Indian manufacturing industrySMEs form the backbone of Indian manufacturing industry

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“In order to achieve 10% share as envisioned and enhance contribution in exports, manufacturing output or GDP, there is an urgent need to address the challenges faced and empower MSMEs to avail of new opportunities in global value chain”

~ FICCI, Manufacturing Mandate

• Lack of access to technology• Lack of access to markets and global supply chain• Low level of innovation• Lack of Infrastructure• Large number of MSMEs in the unorganised sector

– Need to be mainstreamed• Difficulty in securing finance• Lack of skilled work force

Several Challenges faced by SMEs hinder their growth and Several Challenges faced by SMEs hinder their growth and prospects of availing the global value chain…prospects of availing the global value chain…

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Clusters, as a concept has been employed globally to address the challenges Clusters, as a concept has been employed globally to address the challenges faced by SMEsfaced by SMEs

Central Government

State Government

Academic Institutions

Research InstitutionsUniversities/Universities of Applied ScienceResearch Institutions subordinated to Central Government

Framework Conditions- policies, infrastructure, skills, technology, markets

MSMEs, large enterprises,Industry Associations,

Chamber of Commerce & Industry

Financial Institutions

Clusters are agglomerations of firms, institutions and their inter-linkages in a location

Why Clusters ?Why Clusters ?

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• Lack of skilled work force• An appropriate institutional frame work yet to evolve• Lack of definite policy on clusters in many countries • Generally working in isolation• Effective cluster development needs support of many

Ministries and organisations : Achieving convergence is a big challenge

• Competency in management of cluster initiatives • Weak net working-Need for internationalization of clusters

– twinning

Clusters also face Challenges affecting their sustainability..Clusters also face Challenges affecting their sustainability..

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Need for a holistic solution for cluster development with greater focus Need for a holistic solution for cluster development with greater focus on innovationon innovation

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Approach has undergone a shift from traditional to commercially sustainable interventions

Not for profit Commercial

Soft Inputs

Critical Infrastructure

Marketing, Credit

SPVAssociation

Role : Networking AgencyRole : Networking Agency

Comprehensive role-play and ability to bring key stakeholders together

SupportInstitutions

Government MSMEs

Programme Management

Agency

Cluster development in India: Some Best Practices

No of Parks

Aggregate Investment

Employment(No of Persons)

Annual Production

Weaving Capacity

(No of shuttle less looms)

Annual Processing Capacity (Million meters)

Annual Garmenting

Capacity(Million Pieces)

40 USD 3.5 bn 908,118 USD5.5 bn 20,000 3,000 2,000

Promoting induced clusters in vicinity of existing clustersPromoting induced clusters in vicinity of existing clustersScheme for Integrated Textile Parks(SITP) – 23 Parks having commenced commercial operationsScheme for Integrated Textile Parks(SITP) – 23 Parks having commenced commercial operations

Induced clusters in the vicinity of natural clusters

Addresses infrastructure constraints of textile industry on cluster basis

Critical mass of entrepreneurs

SPV led by entrepreneurs to own, develop & manage park

GoI as facilitator – 40% of project cost as grant

Professional Programme Manager

Supply chain based with state of the art infrastructure

Sectoral and cluster approach

Drawn from the custer

Sustainability

Improving viability

Handholding support from “concept to commissioning”-proactive project development

Palladam Hitech Weaving ParkPalladam Hitech Weaving Park

Tripura Bamboo Mission – outsourcing the implementation to develop Tripura Bamboo Mission – outsourcing the implementation to develop unorganised artisan clusterunorganised artisan cluster

Technology Induction Production Infrastructure Market Development

Skill Training Capacity Building Institution Building

TBM InterventionsTBM Interventions

National Innovation Council National Innovation Council Cluster ecosystem strengthening for innovations to happen Cluster ecosystem strengthening for innovations to happen

21 new products, 15 new processes, 2 technology transfers, 10 new partners introduced to clusters

Cluster development: Learning

Learnings from successful initiativesLearnings from successful initiativesRelevant for replication and scale upRelevant for replication and scale up

The next level of cluster developmentThe next level of cluster developmentBuilding on the foundationsBuilding on the foundations

The Growth Pole Concept

Eco - SystemFor

Sustainable Employment and Incomes

ExistingEnterprises &

Clusters

Promotion of

Potential Clusters

AttractingNew

Investments

Capacity Building MarketSkills Business Dev ServicesTechnology Prod. Infrastructure

PPCP Institutional Framework

Infrastructure and

Linkages

- Factor Conditions -Policy Initiatives

PURAPURA

• Provision of Urban Amenities in Rural Areas– Integrated development of compact areas around a Panchayat ( local body) or a

Group of Panchayats covering a population of about 40000 through Public Private Partnership by providing livelihood opportunities and urban amenities to improve the quality of life in rural areas

• Salient Features of the Scheme– Implementation through PPP between Gram Panchayat (village local body) and

Private sector partner– Core funding from the central sector PURA scheme

• A Capital Grant of 35% of the Project Cost (not exceeding Rs 1200 million), as an equivalent of a viability gap funding

– Additional support through convergence of Central Govt Schemes– Private partner to bring in investment and operational expertise– Project based and risk sharing among stakeholders

Infrastructure Leasing & Financial Services Ltd. (IL&FS)

Promoted by the CBI, HDFC and UTI

Shareholding pattern

IL&FS : An Overview

……..a Financial Institution

Infrastructure Leasing & Financial Services Ltd. (IL&FS)

Evolved along routes perfectly configured to business requirementsTechnical support and service groups provide specialized expertiseProject development and sectoral companies house the ability to seed initiatives and carry them through to completionStrong core skills - key to successful project development and project financing across sectors - have been developed within the Group

IL&FS :Sectoral exposure

• Objective: To provide sustainable solutions for enterprises that would enable them to become competitive

• Strategy: MSME focus; Facilitating Policy formulation; Concept to commercialisation; multi-stakeholder partnerships to evolve innovative development models

• Range of sectors: Textiles, Agri/ food processing, leather, pharmaceuticals, rural non farm, electronics, engineering….

• Holistic service offering: project development-project implementation-project financing-policy advisory-capacity building

IL&FS ClustersIL&FS Clusters

Footprints across 128 clusters covering more than 8000 MSMEs

THANK YOU

WWW.ilfsclusters.com