Industrial Clusters in India: Evidence from Automobile Clusters in Chennai and the National Capital Region (Discussion Papers No.103)

Discussion Papers are preliminary materials circulated to stimulate discussions and critical comments The Institute conducts basic and comprehensive studies on economic and related affairs in all developing countries and regions, including Asia, the The views expressed in this publication are those of the author(s). Publication does not imply endorsement by the Institute of Developing Economies of any of the views expressed within. Abstract This study analyzes the patterns of agglomeration of some modern manufacturing sectors in India, and in particular the Indian automobile sector. It also examines and contrasts the factors that have led to different patterns of cluster development in two leading auto clusters in India—Chennai and the National Capital Region (NCR). Moreover, the study analyzes whether firms in clusters perform better than those that are excluded and whether the relative importance of variables that determine the behavior of firms differs among clusters. Our analyses, which employ a combination of quantitative and qualitative methods, show that Indian industrial clusters are largely concentrated in the three clustered regions: NCR, Mumbai-Pune, and Chennai-Bangalore, across different manufacturing sectors. Our study of the auto clusters in Chennai and the NCR find considerable differences in the patterns of cluster formation, due partly to the historical and policy conditions under which firms, particularly, the lead firms must operate. Moreover, our econometric analyses confirmed that being part of a cluster positively influences the performance of the auto component firms and those belonging to a cluster perform better.