Round Table on Cluster Development and Innovation Policy



16th October 2008,

Hotel Imperial, New Delhi




In cooperation with the Embassy of Sweden and on the sidelines of the annual Sweden India Nobel Memorial Week celebrations, The NCAER hosted a roundtable discussion on 'Cluster Development and Innovative Policy: The Swedish Experience and Possible Implications for India" on Thursday October 16th, at Hotel Imperial, New Delhi. The lead speaker was Professor Örjan Sölvell, Stockholm School of Economics and the Chief Guest was Mr. Ajay Shankar, Secretary Department of Industrial Promotion and Policy(DIPP), Government of India. Mr. Suman Bery, the Director General of NCAER moderated the discussion. The following note has been prepared by Mrs. Jayshree Sengupta as a personal record of the event.

Europe’s approach to cluster policy is different from India ’s. The focus has mainly been on enterprise and regional policy, research and innovation. The cluster development initiative is aimed at promoting competitiveness, enterprise development and social cohesion that are important for regional policy. The European Union (EU)is much more fragmented than US and the challenges also include promoting intellectual property rights, public private partnership and supporting SMEs as well as promoting venture capital. There are differences in experiences with cluster development with Denmark and France being examples of countries with strong cluster policies

Professor Sölvell pointed out that the EU’s Lisbon strategy aims at making EU the most dynamic and competitive knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion, and respect for the environment by 2010. It also earmarks 3 per cent of GDP  to R&D. In the European Commission Director-General (DGs) have been appointed for the internal market, enterprise policy, regional policy and science policy. The first meeting of the DG Enterprise was in Luxembourg in 2003 and focused on clusters. Mapping Clusters of Eastern Europe was undertaken in 2004/05. It was felt that cluster policy has to be connected with innovation policy.

The European Cluster Memorandum is a programme to initiate cooperation between industry, academia and local level. But Europe is not narrowing the gap with US in innovations.  

The EU’s cluster policy, seeks to gather deeper information through a cluster observatory and to inspire cluster initiatives with fact-based policy networking, cluster manager training, and ‘policy learning’. The cluster initiative includes human resource development, cluster expansion, commercial cooperation, internationalization, innovation and technology and promoting an enabling business environment. But Örjan Sölvell pointed out that EU needs to shift focus from R&D and science to innovation.  

Responding, Mr. Ajay Shankar underscored the point that India ’s micro planning has changed since 1991. In contrast to massive interventions, clusters involve only modest subsidy and are based on public-private partnerships. Clusters like the Pune auto component cluster have become a centre for excellence. Similarly  Tirupur, and some chemical clusters have come up well. The problem is that we need to look at innovation this is different from R&D and science and technology. Clusters have facilitated integration with global economy, but ensuring growth of lagging regions remains a challenge.  

In the general discussion other participants, noted that India has among the largest number of identified clusters  in the world there are three types: knowledge based economy IT clusters, traditional industry and artisanal clusters. Infrastructure development is very important for all. The focus of policy is on poverty alleviation, employment generation, and promoting competitiveness and innovations in traditional industry.  

It was pointed out that the ability for labour to move to different locales freely is an important constraint for cluster development and limits their growth. Besides, economic policy is biased towards small scale where the economies of scale are not great. Perhaps that is why the present cluster development policy in India is inadequate and not reaching its potential, SEZs could have got around these problems. But then there are problems of land acquisition and governance. EU by comparison has lower transaction costs and excellent infrastructure.  

In EU too some initiatives were successful and others were failures. Should there be a heavy hand or an ‘invisible hand’ in helping clusters remains a moot point.

In the case of knowledge based clusters, there is an obvious constraint which is talent. Mr. Kiran Karnik pointed out that in Bangalore there are many people with talent which is the main driver. Soft and social infrastructure is also better. There is an urgent need to have educational institutions for  R&D and innovation nearby. Good institutional base and social infrastructure are very important. Thus creative industries have a logic of their own. In manufacturing clusters on the other hand, learning comes from workers, suppliers and technical tie ups.  

There are not enough linkages between clusters in India . Training is important especially in auto component clusters and can be undertaken in a foreign institution like MIT. Networking of clusters in knowledge based economy is important for commercializing innovations.  

In India there is a whole spectrum of clusters and by bringing one major economic activity to anchor the cluster can help in innovations and high tech can further lead to commercialisation.






















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