United Nations Industrial
Development Organization
      Cluster Development Programme - INDIA


Strategy And Tools

 The Cluster Development Approach

Cluster development focuses on reducing the isolation faced by MSMEs by strengthening the linkages among all key cluster stakeholders (that is other MSMEs, large enterprises, support institutions) to co-ordinate actions and pool resources for a common development goal.

Three pillars of the cluster development approach

Need based - It is beneficiary led and managed

Flexible - To match the local dynamic requirements

Focused - On intermediary groups, not individual firms

The advantages of being a part of co-operative network

Firm Level
Overcome lack of economies of scale and weak capital  base

Firms can still exploit the advantages of a flexible  structure and a faster decision-making process of a typical  small unit

Cluster Level
Greater responsiveness to challenges

Easy and faster diffusion of information

Speedy dissemination of best practices in terms of  organisational capabilities, diffusion of skills and  technological innovation

Distribution of fixed costs among a large number of  beneficiaries

Increased cost effectiveness and a wider appropriation  of benefits of the intervention


As a result of UNIDO’s interventions since 1997, a methodology has been developed that is being replicated in around 80 clusters by all interested Indian agencies and Government.

The key elements of the UNIDO methodology are

  Selection of Clusters: A judicious selection framework based on the cluster's importance, promotability, viability and sustainability helps to ensure an effective and wide reaching impact.

  Diagnostic Study: Gathering dispersed knowledge through a participatory study is essential to learn not only about the constraints and potential faced by the clusterbut also about the strength of linkages and support mechanisms. The participatory process helps build trust with the local actors and secure their positive involvement.

  Trust Building: Establishing an atmosphere of trust within a cluster is essential to build a realistic action plan that will have support from firms, service providers and support agencies.

  Action Plan: An action plan for the cluster is more than the sum total of the demands voiced by different cluster actors. It is a roadmap to develop and foster lasting relationships among the actors and, at the same, time deliver visible results.

  Implementation: The implementation of the action plan is not simply the realisation of the targets set in the action plan. More ambitiously, it provides the opportunity for a radical change in the way the cluster stakeholders interact.

 The responsibility for implementation of various activities is
 progressively shifted to the private sector with support  drawn from local institutions.

  Monitoring and Evaluation: Quantifying the outputs of the activities implemented helps disseminating best practices and strengthening    trust. Such task is made even more difficult than in "traditional"    SSI programs by the need to identify subtle and slowly emerging changes in the relationships among cluster stakeholders.

The successful introduction of such a methodology is the responsibility of a Cluster Development Agent (CDA). The CDA is the person, or team, who oversees the implementation of the Programme in a professional and effective manner at the cluster level.

UNIDO’s tools for cluster and network development

As a result of its long involvement in the field of MSME cluster development in Africa, Asia and Latin America; UNIDO has accumulated expertise that has been systematised into a body of tools and methodologies. These instruments are available to staff and counterparts of UNIDO’s technical co-operation projects to facilitate their task of supporting cluster development. The instruments are flexible and adaptable to the reality of each country. These are:

Methodologies and tools to design, implement, and
   evaluate cluster development projects

Training programmes for cluster development

Joint learning workshops and study tours