The objective of Cluster Development project is to facilitate holistic development of MSME clusters. The institute implemented various cluster development projects with the support of Ministry of MSME, SIDBI, KVIC etc. in many product sectors. The interventions target  technological upgradation, product diversification, design development, productivity enhancement, skill development, market development, export promotion, financial linkages etc. for MSMEs in these clusters, thus supporting them in achieving sustainable growth. Some of the product sectors covered under the cluster development programme are engineering, leather, dyes and chemical, brass parts, auto components, jewellery, pharmaceutical machinery, rice mills, foundry and forging, bearing, diesel engine, metal handicrafts, handloom, handicrafts and village industries.

Work entails understanding the cluster gaps through a diagnostic study of the cluster, preparing cluster vision, strategy and action plan focussing on reviving the cluster. EDII plans its exit strategy by ensuring sustainability of interventions. One of the ways it ensures this is by training and putting in place a cadre of Cluster Development Executives and by setting up Common Facility Centres (CFCs) and capacity building of Business Membership Organisations (BMOs). EDII trained Cluster Development Executives are trained to impart continuous guidance on  improving business performance, adopting appropriate technology, enhancing quality and productivity, increasing turnover and export, and thus the overall efficiency of MSMEs.

CFCs established in the MSME clusters help the members in accessing better technology/ machinery, improve access to critical production processes and raw material (Raw Material Bank) and in complying with environmental norms (CETP).