Rural enterprise clusters in India have often been characterized by low-end
products, poor income earning options and a near-absence of innovativeness. This has
implied limited market access, inadequate organization of production and distancing
from sources of formal knowledge. Policy neglect of rural industrialization
notwithstanding this paper explores the nature of institutional constraints to innovation
through intensive case studies of five rural artisan clusters (handlooms and handicrafts)
in as many Indian states. Whether it relates to access to loan finance or technology
support or linking to markets, the formal institutions (public or private) have been
distanced by informality that typifies most rural enterprise clusters. An obsession with a
sectoral approach to cluster development has negated addressing infirmities of the
space of enterprise, even as scope for learning from some Asian economies in rural
enterprise promotion exists. The paper also enquires if the innovation systems have
been inclusive and pro-poor.