It was in 2007 that the President of India amended the Government of India (Allocation of Business) Rules, 1961 and merged Ministry of Agro and Rural Industries and Ministry of Small Scale Industries into a single ministry, namely, Ministry of Micro, Small and Medium Enterprises (MSMEs). The ministry was given the crucial responsibility of promoting, encouraging and ensuring welfare and growth of MSMEs sector in India.

The Small and Medium Enterprises (SMEs) has achieved significant milestones for the industrial development of India. It has been contributing 40% to the country's industrial output and 35% to direct exports. Within the SMEs, there are various clusters that play a crucial role. According to a UNIDO survey, there are around 400 SME clusters at present. Also, there are approximately 2,000 rural and artisan based clusters in India. It is estimated that these clusters contribute 60% of the manufactured exports from India. The SME clusters in India are estimated to have a significantly high share in employment generation.

The aim of the UNIDO Cluster Development Programme (CDP) in India is to contribute to the overall performance and collective efficiency of the small and medium enterprise clusters for sustainable development by assisting selected local communities of firms and associated institutions in the clusters. This requires the implementation of cluster support initiative in selected clusters as well as assistance to central and local institutions in their programmes of cluster modernisation and restructuring.

Some Indian SME clusters are so large that they account for 90 per cent of India's total production output in selected products. As for example, the knitwear clusters of Ludhiana. Almost the entire Gems and Jewellery exports are from the clusters of Surat and Mumbai. Similarly, the clusters of Chennai, Agra and Kolkata are well known for leather and leather products.

The SME sector plays a vital role in the growth of the country.
It has been estimated that a million rupees of investment in fixed assets in the SME produces 4.62 million worth of goods or services. By its less capital intensive and high labour absorption nature, SME sector has made significant contributions to employment generation and also to rural industrialisation. This sector is ideally suited to build on the strengths of our traditional skills and knowledge, by infusion of technologies, capital and innovative marketing practices.

Small industry sector has performed exceedingly well and enabled our country to achieve a wide measure of industrial growth and diversification. The small-scale sector has grown rapidly over the years. The growth rates during the various plan periods have been very impressive. The number of SME units has increased from an estimated 0.87 million units in the year 1980-81 to over 3 million in the year 2000.

SME Sector plays a major role in India's present export performance. It contributes 45%-50% of the Indian Exports. Direct exports from the SME Sector account for nearly 35% of total exports. Besides direct exports, it is estimated that small-scale industrial units contribute around 15% to exports indirectly. This takes place through merchant exporters, trading houses and export houses. They may also be in the form of export orders from large units or the production of parts and components for use for finished exportable goods. The non-traditional products account for more than 95% of the SME exports. The exports from SME sector have achieved excellent growth and this has been fuelled by the performance of garments, leather and gems and jewellery units from this sector. The product groups where the SME sector dominates in exports are sports goods, readymade garments, woollen garments and knitwear, plastic products, processed food and leather products.