Cluster Pulse, an Ahmedabad based autonomous economic development agency, has been awarded a project by the Small Industries Development Bank of India to identify various non-financial challenges facing five sectoral clusters in the country and recommend measures for enhancing their competitiveness.
SIDBI is the principal financial institution for promotion, financing and development of the Micro, Small and Medium Enterprises sector.
The five sectoral clusters selected for the project include tourism cluster in Jammu, Kashmir and Ladakh, coir floor covering cluster in Alleppey (Kerala), pharmaceutical cluster in Dehradun (Uttarakhand) and Indore (Madhya Pradesh) and carpet cluster in Panipat (Haryana).
Under the project, Cluster Pulse will carry out analysis of business operations as well as SWOT analysis with regard to the selected clusters, focus on their short term and long term vision, identify the non financial challenges facing the clusters and suggest measures for overcoming them so as to achieve the desired competitiveness.
The agency will also look at infrastructure related issues impacting growth of the clusters. The issues to be covered are basic cluster infrastructure such as roads, industrial space, power and gas, common facility centre, marketing infrastructure, water and effluent treatment infrastructure, cloud / IT services infrastructure, government linkages including Public Private Partnership , environmental degradation, renewable energy, technical requirements and international market linkages.
MSMEs, widely dispersed across the country and producing a diverse range of products to meet the needs of local markets, the global market and the national and international value chains, contribute nearly 8 percent of the GDP, 45 percent of the manufacturing output and 40 percent of the exports. They provide the largest share of employment after agriculture.
Statistical data of the past few years indicates that the share of MSMEs in GDP, manufacturing output and exports had been slowly declining.
In April 2013, the Cabinet Secretariat set up an Inter-Ministerial Committee to suggest short and medium term measures for accelerating manufacturing in the MSME sector. The Committee submitted its report in September the same year.
During deliberations carried out with stakeholders, the Committee found that MSMEs lacked the abilities of larger enterprises to advocate on economic and functional issues and therefore came adversely on the receiving end of unexpected actions of other stakeholders including the state machinery.
Stressing that the primary concern of the entrepreneur should be to run the enterprise, the Committee in its report pointed out that the prevalent ecosystem placed huge demands on the time and resources of the entrepreneur engaged in manufacturing. It added that the issues and challenges at different stages of the lifecycle of a manufacturing enterprise were quite diverse.
“A complex and unfriendly business ecosystem pushes small entrepreneurs towards the informal and unregistered segment, which is growing faster than the organized segment by more than five times, and already accounts for over 95 percent of all MSMEs. This trend must be reversed as it is not sustainable,” the Committee’s report said.
The report emphasized on the need for a common understanding amongst policy makers and administrators in multiple departments of the local, state and central governments to help create an ecosystem that would enable and assist entrepreneurs through the life cycle of creation, growth and closure of enterprises and also encourage them to operate in the organized economy.
The Committee made over 60 recommendations covering issues of regulation, finance, infrastructure, technology and market through different stages of the life cycle of MSMEs. In addition, some product specific recommendations were also made in the report.