some projects being completed, i.e., somewhat avoided type (i) failure, but most were small and brownfield, and many were perceived to be subject to a type (ii) failure, i.e., lack of demand.

A more recent scheme was APES (Apparel Parks for Exports Scheme). This targeted green field and larger parks. Location selection (1) was shared between state and center, dimensioning was predecided at between 150 to 250 acres (4), and land provision was the explicit responsibility of state governments (3). Despite offering grants for 75% of infrastructure costs (vs. 40% under SITP), APES saw only 2 projects approved: one in Tirupur, Tamil Nadu, where the industry association _de facto_ took over implementation;<sup>33</sup> and one in Ludhiana, Punjab, which took more than 10 years to develop.

A similar pattern of results may be identified in other sectors. For example, the Ministry of Food Processing (MoFP) also had a cluster scheme, the Food Park Scheme (FPS), which was a centrally sponsored scheme, i.e., funding was flowing to the states that would then fund the scheme locally. The result was that financing (step 5) became even more problematic than when the Center was directly playing this role, leading to the failure to build parks at all (type (i) failure, and therefore all other types of failures).

In contrast, another central scheme for industrial parks that has made similar design choices as the SITP has been widely perceived as effective at avoiding type (i) and type (ii) failures. Like SITP, the Industrial Infrastructure Upgradation Scheme (IIUS) requires compulsory formation of an SPV to drive the process and appointment of the equivalent of a PMC for all-encompassing support. IIUS can only be used for existing parks, i.e. brownfield projects, so the challenge may be lesser. In addition the IIUS only took on SITP-like features in 2009, so the case has been studied in less detail. However, the IIUS applies to any sector, not only textiles, which provides some support to the hypothesis that role selection is crucial in avoiding type (i) and type (ii) failures, whereas the sector to which this applies is much less relevant (with caveats explained below). Further details on IIUS are available from the authors on request.

_Early indications in firm demand, investment and jobs_ Returning to the SITP, the data indicates that parks are not only built but are realizing investment. Long-run target investment in the 40 parks is approximately Rs. 20,000 crores, or $4 billion.<sup>34</sup> Among IL&FS parks<sup>35</sup> , current investment has already reached 38% of the final target. In absolute terms, current investments represent 4 times grant disbursals, which is twice the policy’s objective. Progress towards targets is not related to the average size of plots in the parks. This indicates the scheme has managed to spur extra private investment, beyond park infrastructure, across the SME size spectrum. Further, progress towards investment targets does seem positively related to additional grant disbursal, indicating that private and public investment are being sequenced together. Seven parks already show a ratio of private investment to public grants in line with the final targets. Exhibit 4 provides detailed investment data and statistics, while Exhibit 5 shows the relationships between investment figures and ratios with the percentage of government grant released, park project costs, average plot size and target investment/grant ratios.

> 33 This park was part of the field visits conducted as part of the study, and several entrepreneurs were interviewed. 34 This corresponds to around $2 million per entrepreneur per park on average, which might seem an ambitious target and if reached would mean the SMEs in the park would eventually graduate from being officially classified as “medium”. Reaching half that target would still be a considerable achievement and does not seem out of line with investment rates observed during field visits.

> 35 Excluding the two parks cancelled among IL&FS ones, the sample analysed here

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