The Hindu Business Line : Caught in a cleft over clusters

Clusters did exist in India even before Michael E. Porter analysed their virtues or before the Chinese had the SEZ brainwave in a bid to inject badly needed capital. Going under the drab name `industrial estates', Gujarat and Maharashtra well and truly pioneered the cluster ethos many decades ago.

CLUSTER development, at least from the industry perspective, has been gathering force acrossthe globe for a while now. Especially in pockets where there is an absence of large companies.

By popular definition, clusters are geographic concentrations of interconnected companies, specialised suppliers, service providers, and associated institutions in a particular field.

In an article some seven years back in Harvard Business Review titled, "Clusters and the New Economics of Competition," Michael E. Porter said that clusters foster high levels of productivity and innovation and lay out the implications for competitive strategy and economic policy.

Porter explained how clusters affect competition: a) by increasing the productivity of companies based in the area; b) by driving the direction and pace of innovation; and c) by stimulating the formation of new businesses within the cluster.

Silicon Valley for software and Detroit for automobile manufacturing may best represent clusters.

In the Indian context, there is the automobile ancillary industry cluster of Pune and, more recently, many of that city's call centres and BPO stations that are a more pan-Indian phenomenon than a regional one.

And from a more regulated kind of environment, nothing fits the bill better than Special Economic Zones (SEZs) that are still springing up all over the country.

Not that clusters did not exist in India before Michael Porter analysed their virtues or before the Chinese had the SEZ brainwave in a bid to inject badly needed capital. Going under the drab name `industrial estates', Gujarat and Maharashtra well and truly pioneered the cluster ethos many decades ago.

What have now become virtual toxic wasteland — the 450-km stretch between Vapi and Mehsana that came to be euphemistically called the Golden Corridor can only be described as a bad example of cluster development.

Though not quite up there with the Golden Triangle, the belt where numerous cottage kind of industries producing dyes, intermediates and other substances banned from production elsewhere in the world have sprung up ranks is a classic case of what clusters should not become.

One State to lay great emphasis on cluster development has been Kerala and its initiatives in this direction over the last couple of years have started showing amazing results.

In the absence of any big industries and always fighting a battle on having an industry-unfriendly image, Kerala is trying earnestly to make amends by promoting industrial clusters in such sectors as rubber, coir, food products, garments and bamboo.

According to Mr P. H. Kurian, Secretary, Investment Promotion, Kerala Government, and one ofthe architects in the effort to get Kerala's small and medium enterprises (SMEs) aplatform to compete in the globalised market place, quite a few sectors have been identified for embracing the cluster philosophy. However, the Ayurveda sector will be the next big focus area.

"Now, Ayurveda and Kerala are almost synonymous — at least that is the common perception.

We were shocked when a sector study on the Ayurveda done by the State revealed that, of the annual turnover of over Rs 4,000 crore by the Indian Ayurvedic industryas a whole, the contribution of Kerala was a mere Rs 200 crore," says Mr Kurian.

The State government's efforts to see the almost 100-strong Ayurveda cluster of Kerala evolve as a truly global brand, will take the shape of a unified label — CARe-Keralam.

It may take a while before CARe-Keralam gets a toehold in the market, but that does not stop the State trying out its cluster approach in other areas. It is learnt that fisheries will vie with ethnic food products as the next big noise from Kerala.

Thus, banana chips and halwa will compete vie with prawns and mackerel as individual enterprise makes way for consortiums.

Industry is not the only walk of life in Kerala that seems to have benefited from the cluster approach. Politicians in Kerala are rediscovering the advantages of clusters, having once pioneered this segment by bringing in coalition governments into the Indian polity.

The Democratic Indira Congress, the breakaway party floated by the old tactician and Chief Minister many times over, Mr K. Karunakaran, has started attracting other breakaway factions, especially those from other disgruntled local Congresses and has even gone to the extent of creating ripples in the Marxist party.

So much so that the new political outfit has become the rallying point where one should not be surprised if it turns out a) increasing the productivity of companies based in the area;b) driving the direction and pace of innovation, and c) stimulating the formation of new businesses, thus reinforcing Michael Porter's theories on cluster development.

Sure, one can easily brush aside the juxtaposing of Porter' cluster theories on realpolitik in God's Own Country as stretching matters a wee too much, try this one: The Maharashtra government has been advised by `experts' that the issue of old and dilapidated buildings in South Mumbai that have been crumbling of late need to be addressed in clusters.

Whether it means the State government should wait till a number of buildings in a given geographical space collapse before broaching the subject of rebuilding is open to interpretation.

Instead, if it were to apply Porter's take on clusters in the case of displaced dance bar girls,another area where the State government may be considering a cluster approach.

For suggestions of group rehabilitation in industries such as Bollywood is making the rounds"In theory, location should no longer be a source of competitive advantage.

Open global markets, rapid transportation, and high-speed communications should allow any company to source any thing from any place at any time. But, in practice, location remains central to competition," the Harvard Business Review article adds.

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