Cluster Development

Promoting MSME Clusters In North East India


The North Eastern Region (NER) of India comprising of eight states-Assam, Arunachal Pradesh, Meghalaya, Mizoram, Nagaland, Tripura, Manipur and Sikkim is almost ten years behind the rest of India. The region is blessed with plenty of natural resources like forest and oil, tea, water (which is very scarce in most parts of India) etc, but there exists a resource slack.

It is often said that the north east offers immense potential for growth on Micro Small and Medium Enterprises (MSMEs). The geographical location which has so far been regarded as the bane of northeast has become a boon for the region with the changing policies of the government and emphasis on look east policy. The market is likely to experience considerable expansion when this materialises and therefore it is necessary that the region gears itself up to face the challenge and grab the opportunity .There is therefore need to identify areas where the region has the potential for growth.

A closer look at the status of MSME’s in NE reveals that there has been a slow but steady growth of the MSME sector and along with this there has been a high incidence of sickness. Therefore, determining the factors that have held back the growth becomes important. The problems that are being experienced by the MSME units of the region include problems related to availability of credit, high cost of operation, erratic power supply, lack of infrastructure, inadequate market linkage etc.

The focus therefore needs to be on minimisation of problems if not their elimination and optimisation of the positive environment so that the growth of the sector becomes possible. To prop up the economic growth of the north-eastern region the small scale industries need to traverse a defined path that takes into its fold the diverse form of resources and demand that exist in the region. In the present day economic equations, the development of the different sectors are interdependent and so the MSME growth process in the northeast also need to take cognizance of this fact. Therefore when the growth prospect of MSME is looked into, it cannot be considered in isolation and it is seen that when development in the comprehensive manner is considered, the region offers vast opportunities for the sustenance of the MSME sector. The need is to optimally utilise this growth potential. As such it can be emphasised that such a comprehensive growth process is not only going to aid the MSME sector to flourish but at the same time bring about multi-dimensional effect on the economic front.

The growth and development of the MSME sector can emanate from:

  • The rich natural resources and diverse agro horticultural unexplored areas of the   demand of the bulk purchasers.
  • The ancillarisation opportunity in the region.
  • The existing and prospective clusters of the region.
  • The traditional skill of the people of the region.
  • Resources of the region and scope of resource based MSMEs

The size of the MSME units and the operational problem experienced by them shows that cluster development can play a significant role in working out a viable solution to these problems and expand the operation of the SME units. The region offers ample opportunity for cluster development and these opportunities need to be exploited to the optimum. The process of cluster development however has to concentrate on the following:

  • The fragmented skill is to be unified to ensure profitability.
  • The marketing problems by the MSME units have to be minimised through proper network.

In the present scenario, MSMEs on the one hand have access to far greater market and better technology and resources, while on the other hand globalisation has resulted in an environment of highly competitive local markets with imports from other countries flooding local markets and threatening the very existence of local MSMEs by offering better quality products, sometimes at cheaper rates. Clustering is a powerful tool that MSMEs may use to combat the challenges of globalisation.

Promoting Clusters

All the clusters taken up for implementation in NE region are traditional clusters and are mainly in the handloom and handicraft sector. These clusters have grown out of specializations in certain locations producing niche products made by skilled and semi skilled artisans. There are very few micro/households units based clusters like food processing , incense stick making which are typically labour intensive in nature and do not have niche products.

Since most of the units in the cluster are household units, they are mostly unorganized and need a lot of handholding support. During the 18 months period of soft intervention a lot of time has to be devoted in trust building, creating awareness on financial literacy, technology, product development, etc and hence during this period, the focus is primarily on four areas-

  • Awareness creation/ SHG formation
  • Credit linkage
  • Product development and market linkage
  • Skill up-gradation

The period of soft intervention is not enough to enable household units to consolidate and scale up to micro enterprises. Further, the absence of micro enterprises in the cluster is a deterrent for forming SPV and going for hard intervention .The range of income per household ranges from Rs 3000 to Rs 10,000. The households in the cluster mostly use obsolete technology and there is great need for skill up gradation and value added products.

Impact and lessons learnt:

Most of the cluster units face problem relating to:

  • Access of technology
  • Access to raw materials
  • Design and product up-gradation
  • Infrastructure
  • Market and marketing support

The above problems can be addressed through the cluster approach as cluster can be a part of a bigger value chain mechanism (raw materials, intermediaries, finished products and marketing).

  • While implementing clusters in NER through the Regional Resource Centre on Cluster Development, a holistic approach for cluster development was adopted where along with measures like capacity building, skill development, technology up-gradation, improved credit delivery, market support was also provided. A major thrust was also on achieving convergence with multiple agencies having specialization in respective sectors and skills
  • Realizing the need for providing market support for the clusters, an initiative to create a platform enabling direct interaction between cluster artisans and different prospective buyers. The ‘Cluster Conclave’ which became an annual event helped the artisans to understand the market demand and facilitate market tie-ups and market feedback.
  • Through the interventions made there has been considerable impact in the socio-economic status of the artisans- Credit and market access helped in enhancement of family income and in case of women dominated clusters helped in decision making, recognition in the family, etc. There was also larger impact on social awareness as cluster actors had access to public distribution systems, sanitation facilities, safe drinking water, etc. The third area where there was considerable impact was access to appropriate technology and ability to make value added products and products based on market demand.