Cluster Development Approach in India: An Antidote for Micro, Small and Medium Enterprises

This paper focuses on two main aspects of the clusters, namely, which factors gives rise to development of clusters and what benefits are acquired by firms from participating in clusters of India. The methodology used for this article is a literature review of published materials. A broad search strategy was used using key terms like industrial clusters, evolution of clusters, and advantages of clusters from electronic databases. Among the factors that give rise to clusters in India, the more important ones are historical background, easy availability of raw materials, existence of one or few large enterprises, pooled labour market of skilled workers, regional government policy, and presence of entrepreneurial spirit. The important benefits reported by enterprises through their presence in clusters are formation of new business, network formation with supporting institutions, women empowerment, market development, product development, easy availability of finance, increased trust and collaboration among members, increase in sales, skills up gradation of workers and employment opportunities. We expect that the findings from this study will assist firms and policy makers in making more informed decisions regarding the adoption of a cluster approach and start new initiatives for promoting inter-firm relations within MSME clusters. The major contribution of this paper is that it attempts to justify the positive impact of cluster approach and describe the status of clusters in India.