July , 2018
An overview of cottage industry
16:12 pm

Aritra Mitra Aniket Panja Rohit Prasad

Several cottage industries involve traditional workers, craftsmen, and artisans who have inherited their work as an art form from their previous generations. Their products include clothes such as khadi, leather, silk, cotton, wool, muslin and others. Their products include many precious items like jewellery, ornaments, statues, idols, gems, stones and also edible items like spices, oils, and honey. All these items have a huge demand not only within India but also in foreign markets.


The Indian cottage industry is generally an unorganised sector and falls under the category of small scale industry (SSI). The industry produces consumable products through the use of conventional methods. Such type of industries originates usually in the countryside where unemployment and under-employment are widespread. The cottage industries face major risks from medium or large industries, which demand huge amount of capital investment for all types of advanced technologies. Indian cottage industries are destined to play a significant role in the economic development of the country while keeping in view the potential for employment generation, preservation of cultural heritage and the dispersal of industrial activity into the backward regions.

The centre of Indian life is in the villages. So, cottage industries are a necessity to India and they shall be so until the very structure of society is changed. Since most of the people live in the villages, it is not possible to establish large industries at many places. If the village population has to live, it will have to depend a good deal on cottage industries. It will give them employment and will also save their society from decay. Cottage industries had declined with the downfall of the Mughal Empire until Mahatma Gandhi came on the scene and infused new life and vigour into the industry.

On October 2, 1993, the Government of India launched the ‘Prime Minister’s Rodger Yolanda Scheme’ (PMRYS) for the educated but unemployed youth and for providing them with self-employment ventures in industries, services and business. Today it provides them with training in government-recognised or government-approved institutions. Under the Ninth Five-Year Plan period, a target of training 90,500 persons was made out of which 68,525 persons were actually trained and 73,672 applications were sanctioned for providing financial assistance to the tune of  Rs. 380.84 crore and an amount of  Rs. 297.71 crore was actually dispersed to 59,578 applicants.

Under the Government’s Tenth Five-Year Plan, the areas identified for the development of SSIs are Leather and Leather products, Textiles and Readymade Garments, Gems and Jewellery, Pharmaceuticals, Information Technology, Bio-technology, Automobile Componenta, Food Processing, Coir industries and others. Introduction of the Market Development Assistance scheme (MDA), Entrepreneur Development Institute (E.D.I), State Industries Centres – EDP Training, Women Entrepreneur Development Programme, Construction of DIC building, maintenance, contribution to specific fund (TTM), Assistance to Coir Industrial Co-operative Societies, assistance for setting up of industries (Capital Investment Subsidy to SSI units) etc., has made it possible for the cottage industries to flourish well.

In the recent past, cottage industry has played a commendable role in the economic development of Jammu and Kashmir. It affords great potential for exports and employment generation. The industry is particularly export-oriented as more than 90% of its total production is exported to many foreign countries.

Given the government’s intention to boost domestic manufacturing and create new jobs, its proposal to introduce a new policy for Micro, Small and Medium Enterprises (MSMEs) deserves a closer look. According to a report published in The Hindu, India’s MSME sector has recorded more than 10% growth in the recent years. MSMEs contribute nearly 8%to national GDP, employing over eight crore people in nearly four crore enterprises. It accounts for 45% of manufactured output and 40% of exports from India.

Problems and solutions

In India, cottage industry is facing the problem of capital shortage. The financial institutions are not ready to provide the credit at a low rate of interest which is an obstacle to the development of small scale industries. There is also a stiff competition between the large scale industry and small scale industry and usually it is the small scale industry that ends up losing, unable to keep up with the large scale industries. Cottage industry cannot get enough raw materials and whatever raw materials he does get is mostly of poor quality provided at higher prices which in turn raises the cost of production.

It should be remembered that cottage industry is a major employment sector and the people should be made interested in patronising home-made goods. A ready market is a further step in this direction. Rural Cooperatives and Rural Banks should be established and stabilized by the Government for advancing short-term loans on nominal interest. Lastly, adequate marketing facilities should be arranged for them, as sale of goods has now-a-days become as complicated an affair as production itself.


In the neighbouring country of Pakistan, cottage industry holds an important place in the rural set up. Cottage industries along with other small-scale industries have helped to provide employment to 80% of the industrial labour force. This has reduced unemployment to a considerable degree. In addition to this the effective use of local raw materials has also helped to develop and improve the agriculture and mining industry.

The Nepalese farmers have subsidiary sources of income and do not have to waste their time when they are not farming. The industry produces a wide variety of goods and helps the consumers to satisfy their wants by supplying consumer goods at short notice. As a result, cottage industry can tend to the export market which in turn helps to earn foreign exchange. By catering to the export market the import is reduced which greatly benefits a country like Nepal and will have even greater benefits for a country of the potential of India.

Foreign trade: A Study

According to a study based on the annual report of The Central Cottage Industries Corporation of India Ltd. for the financial year 2016-2017, the gross income received from this sector during the year 2016-2017 increased from Rs. 4551.13 lakh in the previous year to Rs. 4583.46 lakh. The overheads of the corporation increased from Rs. 4452.27 lakh in the previous year to Rs. 4623.82 lakh in the current year. The current year ended with a pre-tax profit of  Rs. 13.87 lakh as against corresponding profit of Rs. 98.50 lakh in the previous year. The gross turn-over of the corporation for the year under report was Rs. 8763.48 lakh as against Rs. 8592.44 lakh in the previous year, i.e., is 2015-16. This increase has been observed, apparently because of the increase in the total exports of the corporation. The exports of the corporation during the year 2016-17 were Rs. 341.45 lakh as compared to Rs. 288.20 lakh in the previous year.

The total foreign exchange earnings and out go during the year were Rs. 3201.35 lakh in terms of foreign exchange earnings by way of exports and sales in India for which money was realised in foreign currency. The foreign exchange out go is estimated to be Rs. 8.16 lakh.

During the F.Y. 2016-17, 65 numbers of new designs were developed. Special initiatives were taken during the year to enhance the sales including online sales. 526 numbers of additional products were showcased on the website of CCIC during 2016-17. 34 numbers of new corporate customers (mostly foreign based) were also added during the financial year 2016-17 to whom sales of Rs. 1 lakh and above was made during the year.

Moreover to facilitate the sale of these products on a global level, 65 theme based exhibitions were organised in and outside Emporia, whereby new range of products were displayed to expand the patronage of the Corporation. CCIC also participated in four overseas fairs sponsored by DC (Handlooms)/ DC (Handicrafts) at Hong Kong, Italy, Malaysia, and Germany.

The products of these industries are exported to countries like the US, the UK, the UAE, Germany, France, and Latin American Countries (LAC), Italy, The Netherlands, Canada and Australia. The US alone accounted for approximately 26.1% of India’s total exports from this sector in 2014-15. It was followed by the EU which accounted for approximately 24.7%. The UAE was the third largest importer of Indian cottage industries products with imports worth $410 million in 2014-15. But having said that, a heavy import surge affecting cottage industries for the worse, has also been observed in this case. The import of various goods from abroad, in the country is on the rise that has hit hard the local cottage and micro industries. This trend has been observed, mostly in the northern parts of the country, significantly in the state of Punjab, to be specific.

According to a study based on the reports of a leading daily, “the inflow of engineering components like sewing machine parts, auto parts, cycle parts, sanitary products, consumer durable goods and other such products from countries like China has gone up by 70% in a span of 5 years and goods worth staggering Rs. 50,342 crore have been imported from F.Y. 2010-11 till November’15.”

Commenting on such circumstances, Upkar Singh Ahuja, General Secretary of Chamber of Industrial and Commercial Undertakings (CICU), said, “This trend is very worrying. Free flow of goods from cheaper sources like China, Vietnam, etc. has impacted the demand for locally made goods which is losing out due to huge price difference. This is not only destroying the micro and small industries but wiping out cottage industries…” Ahuja also said, “As of now the only solution in sight to deal with this problem is to increase the import duties.” However the issue has been raised by the concerned parties in the state of Punjab, it could pretty well be the case in any part of the country as the major fault lies on the part of central government and its unorganised behaviour in terms of managing the sector.


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