Monday, June 05, 2006

Industrial clusters

Of late there has been a flurry of activity around newer automobile companies setting up shop in India, SEZs. Chennai is at the forefront of this activity. BMW, has, of course been the biggest news around, but they are not the only people to set up shop in Chennai. The Bombay Pune belt is a preferred destination, Delhi and the cluster around it is another one. All this came to mind as I mulled around the previous post on Silicon Valley.

That led me to thinking about industrial clusters in India. Take Bombay-Pune, Bangalore, Chennai and even the Noida-Gurgaon belt as an example. All of these centers have a balance of old economy and new economy ventures. The Bombay Pune belt for example houses industries starting from textiles to machinery to IT. The Noida Gurgaon belt also has a similar pattern. Hosur-Bangalore has a lot of aerospace, defence establishments among others. Hyderabad is an example of a place with less old economy ventures and more new economy ventures. Gujarat is an example of the reverse, where the old scores over the new. Both state governments are going all out to woo industries of all types. In almost all of these areas there is a steady supply of manpower through colleges (not necessarily hi fi colleges) and other technical training institutes.

The growth of Hyderabad is an interesting story in itself. IT is a land intensive industry because of its need for campuses as is manufacturing. AP and Hyderabad in particular has a lot of land that is essentially fallow and rocky. With doles like land, tax breaks Hyderabad has managed to make significant headway in attracing new investment - ISB, Microsoft, Infosys, Wipro, National Games and so on. The land around Hyderabad was lying waste in any case. Now it has generated employment and industry.

Gujarat is a different case. With an abundance of old economy ventures right from chemical to textile, IT has been slow in reaching out there. But with excellent infrastructure in places like Gandhinagar, it was only a matter of time before IT reached there and it has. Patni, TCS and a few other call centers have made Gujarat their choice.

The point of this post is that, industrial clusters are just that - symbiotic clusters. They feed off each other and need nutrients to grow - that also means colleges and manpower. Old economy feeds into new economy and together they sustain the cluster. Good roads, electricity, manpower, educational institutions are nutrients. Proximity to big cities, other industrial clusters are vital connections. Which is why I am sceptical of governments ability to attract industry to tier II cities without doing any groundwork. I mean, why would someone go and set up his company in a tier II city which has none of the above? So if any government is serious about developing the industry within or around a tier II city, these basic questions have to be addressed. So what about SEZ's ? Indias arguably biggest SEZ is the SEEPZ, but SEEPZ is essentially in Bombay which makes it almost self sustaining. Any other SEZ would also need all of these ingredients if it is become a success.

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