MSMEs: The Backbone of India's Economy
Industrial Clusters
Many MSMEs work in geographic clusters, such as leather in Kanpur or hosiery in Tiruppur, gaining shared skills and suppliers.
MSMEs cluster because it helps them to be efficient.
What a cluster is
A cluster is a concentration of related firms in one area, such as knitwear in Tiruppur or locks in Aligarh.
Advantages
Shared suppliers, skilled labour, buyers and know-how lower costs.
Common facilities
Shared testing labs, effluent plants and training centres can be set up for the cluster.
Risks
Clusters can be hurt by a single shock, such as a change in export rules.
A knitwear town
Yarn suppliers, dyers, stitchers and exporters are all within a short distance of each other.
Thinking clusters are random
They form for economic reasons.
Key takeaways
- Clusters concentrate related firms.
- They share skills and suppliers.
- Common facilities help.
- They can be vulnerable to shocks.
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