Cottage Industries in India: Meaning and Problems Faced

Cottage industries in India are a significant source of livelihood and employment. Usually, in cottage industries, goods are manufactured on a small-scale basis. There are various ancient well-known cottage enterprises in India. However, the cottage industries of India shut down due to industrialisation. The government has taken multiple measures to revitalise the cottage industry in India. Currently, cottage industries play an important role in the Indian economy.

What is Cottage Industries?

Cottage industries are small and informal industries established in cottages or dwelling places. They are small-scale units or manufacturing businesses managed by family members from their homes or establishments usually near their homes. They are the backbone of the Indian economy. In India, the Khadi and Village Industries Commission (KVIC) is the organisation that promotes village and cottage industries. 

The cottage industries rely on local labour due to a small investment in the business. They are usually unorganised or decentralised manufacturing businesses operated from homes using local raw materials and simple hand-operated tools.

Cottage Industry Examples In India

Some examples of cottage industries in India are as follows:

• Weaving.
• Silverware.
• Pottery.
• Carpentry.
• Bamboo crafts.
• Stone carving.
• Blanket making.
• Ceramics.
• Textiles.
• Handmade jewellery.

Types of Cottage Industries In India With Examples

India is known for its diversified culture and has enormous cottage industries, from handicrafts to traditional cottage industries. However, the types/list of principal cottage industries in India is as follows:

Cotton weaving: The cotton weaving business is an important industry in India. Cotton clothing is worn across the country. Thus, the expertise dates back to ancient times. Cotton clothing is famous for its rich colour, classic design and patterns created using handlooms by skilled weavers. Tamil Nadu, Maharashtra and Gujarat have the most cotton production.

Silk weaving: Silk weaving is a well-known cottage industry in India. Silk is a key exporter and producer in our country, domestically and internationally. Karnataka is the top silk producer state, accounting for around 70% of the silk weaving industry. Tassore, Mulberry, Eri and Muga silks are produced across the country.

Carpet weaving: The carpet weaving industry was introduced to India during the Mughal period. The Kashmiri carpet is famous for its unique texture and quality. Similarly, coir and durries carpets are also preferred. The carpet industry is spread across the country, with most of them situated in Rajasthan, Kashmir, Uttar Pradesh, Punjab and Andhra Pradesh. The Indian government has also established the Carpet Export Council to promote knotted rugs across the country.

Leather production: India is a significant producer of high-quality leather to worldwide markets, roughly 10% of global demand. The leather sector employs around 2.5 million people and is one of the largest export earners. West Bengal, Tamil Nadu and Uttar Pradesh are the top states that produce leather.

Metalworks: In India, metal is utilised to create utensils, figurines, jewellery and other items. India’s metal handicrafts are well-known worldwide and contribute substantially to the country’s economy. Metal handicrafts are made with hand-operated tools and without using high-tech equipment.

Role of Small-Scale and Cottage Industries In India

• The cottage industry provides ample employment opportunities, resulting in reduced poverty.
• It is considered one of the effective means for a balanced regional development of the rural economy.
• It promotes women’s self-reliance since they play a significant role in these industries at the working and managerial levels.
• It provides allied services to big units since they do not produce raw materials such as small tools, spare parts, woollen products, etc., but procure them from the cottage and small industries.
• They are eco-friendly and energy-efficient industries with low levels of emission.
• They utilise local skills and have low capital requirements.
• They hold high export potential since their traditional, environment-friendly, and unique products have substantial global demand.

Problems Faced By Cottage Industries In India

Below are the major problems faced by the cottage industries in India:

Non-availability of timely and adequate credit

Traditional banks give loans with higher interest rates than microfinance institutions. The high-interest rates are due to the low income and poor credit history of rural borrowers. It is difficult to get investors for cottage industries since investors prefer to invest in medium and large companies that make money quickly and get significant returns. Thus, they face problems in obtaining adequate and timely credit. 

Inefficient management

Cottage industries are managed by family members or individuals who oversee the operation and lack business vision. An individual assumes responsibility for the management of the industry and business outcomes. It prevents the industry from expanding and scaling its operations, which results in the industry being exposed to a small market. The industry could face a huge risk in case the market slows down.

Lack of infrastructure

The lack of infrastructure challenges the growth of cottage industries in India. Though Indian villages are connected through roads, not all villages have a good road connection. Thus, they are not easily accessible to the public and investors, hindering their sales and growth. Similarly, the availability of electricity is also a problem for cottage industries. Rural India faces frequent power cuts causing a loss of productivity for businesses. Due to poor financial conditions and low capital, they also find it challenging to procure machinery and equipment.

Technological obsolescence

Technological advancement is the key to success for any industry. Large industries and companies take advantage of technology to expand and grow their business across the globe. The cottage industries do not have adequate knowledge of the latest technology, tools and production techniques. Net connection is required for marketing the business and gaining knowledge of the latest trends in the market. Since cottage industries are situated in rural areas, they lack good net connectivity, thus impacting their growth.

Limited availability of raw materials

Cottage industries have limited resources or raw materials. They depend on resources that decrease with time or are available only in specific seasons. They may not get resources due to financial constraints. Many of these industries need help to obtain the raw materials they require at the right time and place.

Marketing problems

Marketing plays a vital role in the growth of a business. Marketing involves promoting the business through advertisements, social media, newspapers, pamphlets, etc. Cottage industries face difficulty in spending on costs for advertising and marketing. They may also not have the expertise to develop a strong marketing plan. Small businesses usually have issues with branding and marketing as they may need more funds or expertise to build a strong brand identity leading to a lack of visibility and awareness in the market.

Competition with large-scale industries

There is high competition amongst industries in India since many industries are in the same area. Additionally, cottage industries face competition from large-scale industries having huge capital to promote and grow their reach across the country. They struggle to capture the market due to tough competition from multinational corporations having skilled talent and resources. Large-scale industries do not face the problems of scarcity of finance, raw materials, power, etc, to grow their establishments and eliminate competition.

Shortage of labour

Cottage industries rely on the labour workforce and generally employ local talents. They have the advantage of using labourers at a low cost due to the immigration of skilled labourers to urban areas. But they are facing a labour shortage due to insecure working conditions, low wages, rural locations, and long working hours. A lack of skilled labourers in cottage industries is harming the growth of these businesses beyond local limits.

Government Measures to Resolve Problems

The government has undertaken various measures to promote cottage and Small-Scale Industries (SSIs), which are as follows:

• Establishment of the National Small Industries Corporation (NSIC) and District Industries Centre (DIC) to promote cottage industries.
• Setting up Small Industries Development Fund (SIDF) to provide refinance assistance for the expansion, rehabilitation, and modernisation of cottage industries.
• Creation of a National Equity Fund (NEF) to empower cottage industries and improve their acceptability for financing by Primary Lending Institutes (PLIs).
• The small Industries Development Bank of India (SIDBI) assists cottage industries by introducing suitable schemes for new projects, diversification, expansion, rehabilitation and modernisation of existing units.
• Small-scale enterprises, including cottage industries having turnover up to Rs.1 crore, are exempted from the excise duty.
• The concessional customs duties rates are levied on importing certain raw materials and components used by cottage industries and SSIs.
• Small-scale Industries Development Organisation (SIDO) provides managerial, technical, economic and marketing assistance to cottage industries and SSIs through its network of service institutes and extension centres.
• The Council for Advancement of Rural Technology (CART) provide technical assistance to rural cottage industries.

Organisations that Promote Cottage Industries

Cottage industries in India are endorsed and developed by well-known organisations, such as the Khadi and Village Industries Commission (KVIC). Other notable organisations include the Coir Board, the Central Silk Board, the All India Handicrafts Board, the All India Handloom Board, Forest Corporations and the National Small Industries Corporation, which are working on expanding cottage industries. 

The Department of Industries and Commerce also administers many programmes to assist and provide technical and financial support for new and existing industries with direction. The projects are implemented focusing on modernisation, industry development, quality control and technological advancement.

India’s cottage industries are unorganised and come under the category of SSIs. Cottage industries are economically and culturally significant. They preserve ancient traditions and also employ many people. However, they face numerous challenges. Thus, the government is attempting to address the issues since these industries have growth potential and contribute to the country’s economy if adequately supported.

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