MSMEs and inclusive growth: a comparative study of wood-carving clusters in Saharanpur and agro-processing units in Muzaffarnagar

Abstract

The Micro, Small, and Medium Enterprises (MSME) sector serves as the vanguard of India’s economic resilience, contributing significantly to GDP, employment, and export earnings.

This paper explores the role of MSMEs in fostering "inclusive growth" development that transcends urban boundaries to empower rural and semi-urban populations. The study utilizes a dual-case study approach, focusing on two distinct industrial hubs in Western Uttar Pradesh: Saharanpur and Muzaffarnagar.

Saharanpur, internationally acclaimed for its wood-carving industry, demonstrates how traditional artisanal skills can be integrated into the global value chain through the "One District One Product" (ODOP) initiative. Conversely, Muzaffarnagar showcases the strength of agro-based MSMEs, particularly through its world-leading jaggery (Gur) market and paper mill clusters, which create a symbiotic relationship between agriculture and industry.

The research analyzes how these clusters promote inclusivity by providing livelihoods to marginalized communities, reducing regional disparities, and encouraging women’s participation. However, the study also identifies critical bottlenecks, including the "credit gap," technological obsolescence, and the challenges of formalization. The findings suggest that while these clusters are engines of local prosperity, their full potential for inclusive growth requires targeted policy interventions in digital literacy and infrastructure. The paper concludes that the Saharanpur-Muzaffarnagar model offers a scalable blueprint for rural industrialization in developing economies, provided that the transition from unorganized to organized sectors is handled with financial sensitivity.