Explain the dynamics of industrial clusters in developing countries including India.
Or Discuss the main characteristics of industrial clusters peculiar to India.
Ans. Industrial clusters evolved as a response to the ever-changing business environment, which calls for increasing flexibility and reducing costs. One approach to dealing with uncertainties and changes in the market place is to manufacture a variety of products for different markets using multi- purpose machinery and skilled labour. The other approach is to reduce investments in machinery by hiring other's facilities and employing semi- skilled and multi-purpose labourers on a short-term basis. Characteristics of cluster in India: Geographical proximity: A large number of predominantly small and medium sized firms are located in a geographically bounded space. Sectoral specialisation: The cluster as a whole specialises in a specific industrial sector. Besides, there is a significant intra- sectoral division of work, whereby different units within the cluster specialise in specific sub-processes and manufacture the different components of the main product. • Close inter-firm collaboration: Close inter-firm linkages substitute for vertical integration of all activities within a firm.
• Inter-firm competition: Competition among firms is essentially based on innovation rather than lowering wages. Social embeddedness: A socio-cultural identity which facilitates trust, reciprocity and social sanction against behaviours tndermining common interest is an important feature of the cluster.
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