Capitalizing on traditional clusters3 min read . Updated: 10 Dec 2010, 12:03 AM IST
Capitalizing on traditional clusters
The philosophy of consumerism influences consumers to be frequent buyers, so 1.2 billion Indians represent not just a population but great hope for the capitalist world—a huge and expanding emerging market.
On the other hand, India survives, to a large extent, on its unorganized sectors—MSMEs (micro, small and medium enterprises) that sustain millions of families in an informal, entrepreneurial way that is generic to our grassroots population.
During a recent conversation with Mohammad Haleem Khan, director general of the Council for Advancement of People’s Action and Rural Technology (Capart), one question emerged: how to capitalize on the thousands of traditional occupational clusters of India?
These are not only hubs of economic activity, but also creators of brands in traditional skills and ancient art; there is huge potential to preserve culture and heritage around these clusters as well.
According to Khan, there are many opportunities in programmes such as the Swarnajayanti Gram Swarojgar Yojana (SGSY), an initiative of the ministry of rural development to promote self-employment and improvement in the earning capacity of rural Indians.
The SGSY was launched in September 1999 and has since claimed to have formed more than 3.8 million self-help groups (SHGs). “The government of India has since invested around Rs43,000 crore in various SHG-based micro-ventures, including about Rs14,106 crore in self-employment ventures and approximately Rs28,887 crore by way of institutional credit from banks and the like," Khan said.
Khan is trying to highlight two major issues. One is a top-down supply chain, where the organized sector, including multinational companies, has been aware of the emerging volumes in rural consumption and has tailored its supply chain and marketing to suit those patterns.
But the same cannot be true for bottom-up supply chains. “The enhanced supply in the rural local market has been the bane of some of the rural micro-ventures," Khan said. “The redundancy rate of rural enterprises is very high because of the low margin, multi-layer supply chain, highly controlled by the wholesalers, and the lack of transparency between the producer, marketer and wholesalers."
Take the case of various state-owned emporia, begun in the 1970s. They are often irrelevant, existing next to big and flashy malls. Capart claims to have intervened by supporting Gram Shree Melas since 1989, but they organize only 340 melas, at a cost of Rs21 crore and resulting in sales of Rs62 crore.
Perhaps information and communication technologies (ICTs) can help here. Khan pointed out: “In developed economies, use of RFID (radio frequency identification devices) in the supply chain, extensive use of information communication...(and) real-time exchange of data have virtually eliminated the wholesalers."
The challenge is to create a virtual marketplace, linking all SHGs, with state-of-the-art productization and packaging at the producers’ end, seamless procurement, marketing and supply chains to reach customers anywhere in the world.
Khan sees three components to a grander scheme. The first is a virtual version of a Gram Shree Mela, which can provide virtual mall space to SHGs.
The second is a strain of supporting voluntary organizations that will work with SHGs to enhance and design their products, package their wares, and help with communications.
The third is an effective interface between consumers and producers, making sure that fund transfers, legalities, freight, supply and sales are all handled smoothly.
These experiments have succeeded in private hands, but have often failed if done by government agencies. For instance, the National Informatics Centre (NIC) created an online shopping mall with a very good content management system for SHGs. But unfortunately, in a stable of hundreds of NIC products, this couldn’t win prominence.
To use ICTs for bottom-up linkages, it is important not only to get schemes and policy support from the government; the implementation processes must also be in the hands of private bodies, including voluntary organizations. In other words, rural India should use a public-private-civil society partnership to overcome the market’s demand-supply asymmetry.
Osama Manzar is founder and director of Digital Empowerment Foundation and chairman of the Manthan awards. Mint is a partner of the Manthan awards.