Cottage Industry

 Cottage industries or cottage manufacturing are also called

household industries or rural industries or traditional
industries. The artisans use local raw materials and simple tools to
produce everyday goods in their homes with the help of their
family members or part-time labour. Finished products may be for
consumption in the same household or, for sale in local (village)
markets, or, for barter. It is the smallest industry unit and it is different
from small-scale industries.
 For example, Pots making, bamboo basket weaving, fabric,
mats, Curtain making, furniture making, Jewellery making of
gold or silver.
 Small Scale Industries are industries in which manufacturing,
production, and rendering of services are done on small
scale. The investment limit is up to Rs.5 crore while the annual
turnout is up to Rs. 10 crores.
 Cottage Industries are usually very small and are established in
cottages or dwelling places. Khadi and Village Industries
Commission (KVIC) is a statutory organization that promotes
village industries that also helps cottage industries.
 In Small scale industry outside labour is used whereas in cottage
industries family labour is used. SSI uses both modern and
traditional techniques. Cottage industries depend on traditional
techniques of production.
 If the Iron and Steel industry has helped India to move toward
modernization of the economy, the cottage industry has helped to
 move towards balanced regional development and achieving the
goal of an egalitarian society.
 The cottage industry enjoys a special place in the Indian scenario
owing to the highly diverse socioeconomic and geographical
pattern. These go well with the Gandhian Philosophy for rural
development. Owing to such a special place enjoyed by cottage
industry in India development landscape, the Government of India has
given it special benefits to glow from the plan after plan.
 This industry, however, is facing a deep threats present in the wake
of liberation, globalization and privatization since 1990, due to the
economy of scale of larger firms producing the same goods owing to
the philosophy of the current paradigm that mightier will survive.

cottage industry

Rationale/Importance of Cottage Industry

 Cottage industry enable an increased employment opportunities,

which consequently leads to reduction in poverty and disparities.
  This industry is considered as one of the most important means
to balanced regional development of rural economy.
 Cottage industry is also considered important for the women’s self-
reliance as a major role in these industries is played by women both at
the managerial and working levels.
 These industries provide important allied services to big units. The big
units cannot engage in the production of all their requirements such as
spare parts, small tools, woollen products etc.
 These industries are eco-friendly (handicrafts) and energy efficient
with low levels of emission unlike the big units.
 These industries well utilize the local skills. Many of these traditional
skills attain importance in wake of their uniqueness.
 Cottage industry involves less capital requirements.
 Cottage industry has reduced pressure of population on
agriculture as most these industries are located in villages and small
towns. Thus these help in diversification of rural economy.
 These industry hold high export potential, if tapped properly. The
traditional unique and environment friendly products of these
industries have high global demand.

Composition of Cottage Industry

 Handicrafts
 Khadi/Cotton
 weaving
 Match industry
 Poultry
 Silk weaving
 Bidi Making
 Glass work
  Toy making
 Lock/Knife making

Location factors

Location factors can be classified on the basis of factors given in the table
below

 Physical factors
 Climate
 Terrain
 Forest/vegetation
 Human factors
 Historical tradition
 Market and technology
 Transport
 Technology
Physical factors
Human factors

Problems of cottage industry

 Thank the incentives and encouragement given by the govt, the

cottage industries sector has made substantial progress during the last
three decades. But the development has not been commensurate with
their potentialities or with the need of Cottage industries. Cottage
industries are facing many problems today which are hindering their
growth.
 Due to competition from large factories, many artisans have
abandoned their traditional occupation and become landless
agriculture labourers. This is leading to the extinction of traditional
knowledge-based industries.
 Cottage industries are unable to compete with other sectors due to
many reasons prevailing at the input, processing and output stage
discussed below:
 Input stage
 Lack of availability of credit and finance: There is no
timely, adequate and low-cost credit available to Cottage
industries. Cottage industries have not been able to raise
capital like large industries from Banks and financial
institutions.
 Infrastructural bottlenecks, especially power hampers
productivity and efficiency of Cottage industries.
 Procurement of raw material due to the inadequacy of
funds hampers raw material availability to Cottage
industries in India. This is accentuated by the reluctance
of government agencies which is favouring large scale
industries.
 Processing stage
 Traditional and obsolete technology hampers the cost
competitiveness and productivity of industries. This
prevents further expansion of the industry.
 Under-utilization of potential due to various financial,
technological and marketing constraints is hampering the
growth of Cottage industries in India.
 Output stage
  Absence of marketing, availability of readymade
markets and lack of brand names hamper their further
growth.
 Proper quality up-gradation, monitoring and
facilitation by the government are not there for Cottage
industries due to which the quality products are not
available in the market with respect to Cottage industries
which is hampering their growth.
 Besides, the high incidence of sickness and non-
recovery of dues hamper their operation and
development.

Measures

 Modern Techniques: There is an urgent need for implementation of

techniques which not only enhances productivity but develops skills of
the laborers and meets the requirements of the local market.
 Banking Facilities: Rural Co-operatives and Rural Banks should be
established and stabilized by the Government for advancing short-
term loans on nominal interest.
 Marketing Facilities: The adequate marketing facilities should be
arranged for them, as sale of goods has now-a-days become as
complicated an affair as production itself. The platform of e-
commerce should be utilized which can expand market across all
boundaries.
 The artisans must be helped to get the best price of their
goods. Frequent exhibitions should be organized to enable the artisans
to show their art and industry.
 Some of the schemes and measures taken by the Government for
improving the condition of Cottage industries in India are
discussed below:
 Khadi & Village Industries Commission (KVIC):
 The Khadi and Village Industries Commission (KVIC) is
a statutory body established by an Act of Parliament
(Khadi and Village Industries Commission Act of
1956). In April 1957, it took over the work of the former
All India Khadi and Village Industries Board.
 Functions: It is an apex organization under the Ministry
of Micro, Small and Medium Enterprises, with regard to
khadi and village industries within India, which seeks to
– “plan, promote, facilitate, organise and assist in the
establishment and development of khadi and village
industries in the rural areas in coordination with other
agencies engaged in rural development wherever
necessary.”
 Credit-related schemes:
 Pradhan Mantri Mudra Yojana: Launched in April 2015 by
the Prime Minister, the Mudra Yojana aims to enable Micro
Finance Institutions (MFIs), Non-Banking financial
institutions/Companies (NBFCs), Small Finance Banks, RBRs,
Commercial Banks, Cooperative Banks, etc. to provide Low
Rate Loans to eligible entities.
 Priority Sector Lending: Sectors which the Government of
India and Reserve Bank of India consider as important for the
development of the basic needs of the country and are to be
given priority over other sectors. The banks are mandated to
encourage the growth of such sectors with adequate and timely
 credit through Priority Sector Lending. Sectors under Priority
Sector Lending includes
 Agriculture
 Micro, Small and Medium Enterprises
 Export Credit
 Education
 Housing
 Social Infrastructure
 Renewable Energy
 Others.
 Stand-up India scheme: Prime Minister Narendra Modi had
launched the Stand-up India scheme in April 2016. This
scheme is aimed at providing credit to Scheduled Caste (SC),
Scheduled Tribe (ST), and women borrowers in the non-farm
sector. The scheme is intended to promote entrepreneurship
among SC/ST and women and further give a push to the
government’s financial inclusion programme.
 Skill development and Training related programs
 Skill India Mission: Skill India Mission is a government
scheme launched in 2015. It is an umbrella scheme that
has many skilling schemes and programmes under it. The
chief objective is to empower the youth of the country
with adequate skill sets that will enable their employment
in relevant sectors and also improve productivity.
The chief objective of the Skill India Mission is to
provide market-relevant skills training to more than
40 crore young people in the country by the year 2022.
 Management Training Programmes: The basic
objective of the Management Development Programme is
 to improve the productivity/profitability of existing
entrepreneurs by upgrading their managerial
decision-making capabilities and providing them with
an insight into the latest developments in the area of
industrial management, marketing management, financial
management, inventory control, human resource
development, information technology, and e-commerce,
etc. to make them aware about emerging practices in the
field of industrial management. Keeping in view the
heterogeneity of their academic awareness the need for
the inputs of scientific management various from place to
place and person to person. Hence the orientation to
management principles and practices becomes necessary.

Some of the cottage industries and their location