Highlights of 11 cluster studies involving 3,000 SMEs

13 Dec '08

5 min read

Highlights of the study:
-Outside Metros the benefits of the initiatives of Apex industry chambers is not visible. Almost 100% firms in Ludhiana and Firozabad are either unaware or claim having not benefited from the apex industry chambers.

-Almost all MSMEs have to resort to giving credit to their customers. During recessionary times, the credit given to customers extends beyond the credit period they receive from suppliers.

With the slowdown of demand and the credit crunch MSMEs are the most vulnerable. Strong Implementation of the Delayed Payment protection in the MSME Act 2006 is vital to the health of the MSME sector.

-Getting skilled labour is a major issue and retaining them is a tougher task. 76 % of the firms in the Ludhiana Hosiery cluster reported an attrition rate of over 25%.

-Non-existence of quality certification in certain clusters affects competitiveness and sustenance. For example, in the Ludhiana Hosiery cluster and the Firozabad Glass Cluster most of the firms had not acquired any quality certifications. Even in the NCR IT Cluster, 78% of the firms did not have any quality certification.

Relationship with Industry Associations:
Although 93% firms surveyed in the Ludhiana Auto Component Cluster were aware of the apex industry associations such as CII, FICCI, ASSOCHAM AND PHDCCI, all of them felt that these industry associations did not represent the interests of the SMEs in the cluster.

In the bicycle cluster in Ludhiana, 71% of the respondents were aware of the apex industry associations and all the firms surveyed felt that these bodies did not represent their interests. In the Ludhiana Hosiery cluster on the other hand only 20% of the respondents were even aware of the apex industry associations and all of them felt that these bodies did not represent their interests.

According to the study, “Out of the sample size of 135 firms, only 1 respondent said that CII/FICCI serves their interest.” The study adds “Rest of the 99% of them said we have no relation with CII/FICCI and neither have they served their interest.”

Credit and Payment Terms:
According to a majority of the responses in the clusters, the credit terms for sales and purchase for the Ludhiana hosiery cluster is 30-45 days on purchase and 5-6 months on sales

Relationship of Funding to Export Orientation:
The availability of funding to the firms in the clusters bears a relationship to the export orientation of the business. Funding for export-oriented clusters was easier to come by while for domestic businesses access to bank funding was much lower.

For e.g., in the Ludhiana hosiery cluster there are 56 percent of units involved in exports and who have access to funding from banks, but a question mark remains on the rest of the 44 percent units. This trend is expected to change in the current scenario with the increased focus in domestic businesses.

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