There are villages of West Bengal where the rural economy hinges on one or other particular activity. One cluster of craftsmen churn out wigs, another lights, another polo balls, another boats and another jeans.[i] Porter (1998) defined clusters as “critical masses in one place of linked industries” as the basis for competititive advantage and all over the world this specialisation is a feature of the informal economy. In fact, industrial clusters are a common rather than an exceptional form of development in India and elsewhere. What role does the informal economy play in cluster development?