Cottage industries are a major breadwinner for many households in India. Small scale cottage businesses have one advantage that they can be started with very low initial investments, so this type of business is ideal for people with low incomes/villagers. Plus, the raw materials to manufacture cottage industry products are available easily in their surrounding environment. Let’s dig in deeper to know more through this blog.
Is There Any Difference Between Small Scale Industries And Cottage Industries?
There is just a slight difference between the cottage industries and small scale industries. They are almost the same, but differ in various minute ways such as the features of both the industries, where they are located, who run them, etc.
- Generally, the location of the cottage industries lie in the rural areas and villages whereas small-scale industries are situated in more urban or semi-urban areas
- The cottage industries are primarily run by members of the family, whereas small-scale industries generally employ or hire people
- Cottage industry mainly focuses on meeting the local needs, however small scale industry focuses and covers a wider range of product and areas
- Cottage industries involve basic tools and equipment and they invest a very little amount of capital, the small-scale industries invest comparatively higher {the present limit is Rs. 60 lakhs to Rs. 3 crores} and they include heavy and fully equipped machinery run by power
- The Cottage business is generally run from the home of the artisans itself, on the other hand, small scale businesses are run from business complexes
- Cottage business is comparatively a little unorganized, on the other hand, small scale businesses are organized and run by professionals
What is Cottage Industry?
Google defines Cottage industry as “a business or manufacturing activity carried on in people’s homes”. In simple words, we can say it is industries run from people’s homes it at very low scales. It is a small-scale, unorganized/decentralized manufacturing business generally operated from home or ‘cottages[1]’ using simple hand-operated tools. Examples of cottage industry or business include Smithy, Carpentry, Weaving, Pottery, Blanket making, Stone Carving, Textiles, Ceramics, Handmade Jewelry, etc.
Scope and Opportunities for the Cottage Industries in India
The cottage and small scale industries hold enormous potential for employment generation. Additionally, a person working in such an industry is basically a self-employed one.
Cottage and small scale industries take part in about 40% of the total industrial output in India. There are approximately around 3,50,000 units within the state of West Bengal, providing employment to over 2.2 million people.
Furthermore, it has been empirically found out that this industry has provided economic independence to the women in developing and developed countries. Moreover, the whole family involves in producing items in this industry, hence it facilitates numerous families with an employment option throughout the year.
Also, Read: Tax Benefits for Handicraft Business in India.
Types of Indian Cottage Industry
The term “cottage industry” is associated with manufacturing units that make their products mainly by hand. India is often praised and is well known for its diverse culture, handicrafts from its traditional cottage industries, variety of food items, etc. The major cottage industries in India are cotton weaving, carpet making, silk weaving, leather industry, metal handicrafts, and small food processing industry.
Cotton weaving: It is a very important cottage business sector in India. The skill dated back to ancient times as cotton clothes are widely worn across the country. Cotton clothes are known for their traditional design, vibrant color and patterns created by skillful weavers with their handlooms. The cotton industry is majorly concentrated in Maharashtra, Tamil Nadu, and Gujarat.
Silk weaving: It is another famous cottage business in India. Our country is a major producer and exporter of silk to the domestic and global markets. The major silk is Karnataka and holds about 70% of the total silk weaving industries. Mulberry, Tassore, Muga, and Eri are the type of silk produces within our country.
Carpet making: This industry was first introduced in India during the Mughal era. Although the Kashmiri carpet is known for its superior quality and texture, the durries and coir carpet are also famous. The carpet-making industry is divided throughout the country mainly found in Kashmir, Rajasthan, Punjab, Uttar Pradesh, Andhra Pradesh, and Punjab. Additionally, the Government of India has set up the Carpet export council for promoting the knotted rugs and various other types of floor coverings from across the country.
Leather works: India is a major supplier of high-quality leather to the global markets and meets around 10% of the global demands. The leather industry over 2.5 million people and is one of the major export earners for India. The regions of India producing leather are Tamil Nadu, West Bengal, and Uttar Pradesh.
Metal works: Metal has always been used to make figurines, jewelry, utensils, etc. in India. Metal handicrafts from India are appreciated worldwide and are a major contributor to the country’s economy. Making Metal handicrafts do not involve any hi-tech types of equipment, and are produced using tools operated by hand.
Problems faced by the Indian Cottage Industry
Although the cottage industry has its own advantages it also faces various problems. The following issues are generally faced by the Indian Cottage Industry;
- The middlemen offer low prices to the manufacturer but take heavy chunk of money from the buyers
- The handloom weavers face heavy competition from the power looms industries
- There is a need to implement techniques that develop skills of the laborers and meet the requirements of the local market
- Government do not provide subsidies to these producers in an adequate amount
- Raw materials are limited, i.e. they are either available in specific seasons only or they are resources which decreases with time
- Easy and cheap finances are not available to these industries
- Generally, these industries are located in rural areas, they lack in implementing various marketing strategies, etc.
Small Scale Industries Support Schemes by Indian Government
The government of India has realized the importance of cottage industries in the domestic and international grounds. Therefore, it has taken various steps to solve their problems. The steps taken by the government in favor of the cottage and small scale industries include;
- The Union Government has set-up numerous agencies to help the cottage and small scale industry. Some of them include the Small Scale Industries Board, Khadi and Village Industries Commission, All India Handicrafts Board, AH India-Handloom Board, and Central Silk Board
- The government has included it as a priority sector for the supply of institutional credit
- Additionally, the government has set-up Industrial Estates and Rural Industrial Projects and also, have organized Industrial Co-Operatives
- The government has Set-up district industries centers for providing the services and support under one roof at district levels
- The Central Government has reserved 807 items for exclusive production in the sector to encourage small scale industries
- Furthermore, the government is planning to start various nucleus plants for generating as many ancillaries and small and cottage industry as possible
- Also, the government is planning to enhance the limit of capital investments for these industries
To Conclude
Cottage industries are generally unorganized in nature and come under the small scale industries. They manufacture consumable products by employing conventional methods. Additionally, these type of industries originates where unemployment and under-employment are widespread. So, through this method, cottage industry helps the economy by engrossing a massive amount of remaining workforce of the rural areas.
However, on the flip side, the industry faces many difficulties in various ways. For that, the government is trying to solve the problems of this sector because the government knows that the sector holds a lot of potential in various areas if supported properly.
Read More: How to Set-Up a Pottery Industry in India.
The cottage industry is a small-scale business where the manufacture of goods takes place mostly from home. The workforce consists of family units who typically work part-time with their equipment, using conventional techniques. Products are manufactured at a low level, and the workers are skillful at their job. The business is operated out of a home, and the equipment/tools are generally run on outdated technology. They produce handcrafted products using traditional methods and techniques. Generally, the industry is unorganized and mainly situated in villages/semi-urban areas. Few cottage industries are big and situated in urban areas.
The cottage industry is the backbone of the rural economy and has a significant role in developing the world's economies. It provides a significant contribution to rural development through its employment opportunities on a massive scale. However, the industry faces intense competition from medium- and large-scale businesses in terms of unavailability of skilled labor, capital, technology, and marketing strategies.
Industry Outlook amid the Pandemic
The COVID-19 outbreak across the world has presented with a challenging task for all regions on fighting for normalization on a war footing. Major problems such as unemployment, the inability to run manufacturing facilities, and disrupted supply chains amidst containing the virus are what the cottage industries are confronting today.
The present scenario leaves the cottage industry and the entire world with very few prompt solutions as data predicting the outbreak and its behavior across all regions are still in progress and continually changing. The factors stopping the geographies from devising concrete solutions are the inability to predict how long the outbreak will last and the extent of the spread. The strict lockdown measure across all the economies has had overwhelming consequences on industries large or small, and the cottage industry is one of the worst-affected industries.
For an industry that has its origin in rural areas, unemployment and underemployment is already prevalent. The industry is not expected to revive soon, and there is a possibility of a demand-supply gap, resulting in a price surge. The governments across all economies need tremendous planning to stabilize the unfortunate economic situation and healthcare in a year or two.
Every strike to the economy can be seen as an opportunity. More global demand will arise for essential goods as manufacturing and supply chains have been severely disturbed in some developed regions. More workforce demand will be generated in the service sector for alternative healthcare providers and social workers. Governments need to provide training and proper skill development in this segment, which will provide the much needed shot in the arm for the economy.
How the Industry Works
The first cottage industries in the world were light manufacturing operations in the United Kingdom, and sub-contracted garment making, shoemaking, sewing, textiles, and metal handicrafts in the United States. Members of the family were responsible for producing finished goods using raw materials distributed by a business manager. Many existing industries that operate in facilities or factories were once cottage industries before the advent of the Industrial Revolution.
The majority of customers of the modern cottage industries are those who seek out unique and handcrafted products. The industry also specializes in services that require very few people to run the business. Usually, creative artists who are into pottery, paintings, and sculptures, are a part of the cottage industry as they can undertake the entire production process under a single roof alone or with a few workers.
With the growing popularity of e-commerce, several cottage industries are making a comeback. Artisans and creative artists can leverage online websites to sell products ranging from custom woodworking and hand-sewn clothing to crafts. For instance, the U.S.-based e-commerce company Etsy allows vendors to enlist their products — including a wide range of original artisanal items handcrafted by individuals or smaller groups — for sale to a global market. On the other hand, retail company eBay encourages single individuals to make products and sell them independently to a potentially large audience.
Although most products are now produced at large, handcrafted products are still viewed as an emblem of higher quality.
History of Cottage Industries
The scattered population of the American colonies resulted in large-scale independent farming and household manufacturing. Previously, textile production was the most common form of a cottage industry. Sheep were raised, and members of family units would spin, knit, and finish the cloth. Some of the other items crafted in homes and later sold in the rural markets were glassware, needles and thread, trinkets, cutlery, fabric, and firearms.
An act of the legislature passed as early as 1640 in Massachusetts, United States, supported one of the earliest examples of vocational education in the form of lessons on spinning flax at home. In all likelihood, the roots of manufacturing in the Americas lie in cottage industries.
Two-thirds of the textile production in the Americas still happened in homes by 1820, although manufacturing was increasingly shifting from the house to the factory. During industrialization, most cottage industries went from homes to shots to factories, and then all together to factories.
Nevertheless, the roots of independence and enterprise have not faded from the Americas, and to operate a business is the American dream. While the cottage industry has probably diminished in the past 100 years, home-based businesses are still thriving well in different forms throughout the century. According to the 1980 census, over 2 million people — constituting 2.5 percent of the nonfarm workforce — worked at home for money.
The Cottage Industry in India
The term "cottage industry" is generally used to describe a business operated in small-scale or individual artists. India is one of the many countries known for its large number of conventional cottage industries. But with the arrival of industrialization, many cottage industries have witnessed a steep decline in growth. To revive the cottage industries, the Indian Government has undertaken new strategies to contribute to the country's economy.
India's overall export of coir products, textile, jute, and handicrafts was valued at over USD 26.56 billion between 2010 and 2011, expanding at a CAGR of 10% over the last five years. India ranks second in the world in the production of textiles after China, whose exports are around seven times higher. The overall export of textiles in India is expected to reach USD 82 billion by 2021, up from USD 39 billion in FY2019. On the other hand, India's food processing industry stands at USD 67 billion and is expected to reach USD 175 billion by 2025.
- Top 5 Indian Cottage Industries
The top five cottage industries in the country are the leather industry, cotton weaving, carpet making, metal handicrafts, and silk weaving industries.
The leather industry in India meets about 12.9% of the global demand and handles a solid annual production of around 3 billion sq. ft. of leather. The country is a high-quality leather supplier to the global market. The Indian tanning industry employs around 4.42 million people and is regarded as one of the top ten foreign exchange-earners. The states of West Bengal, Uttar Pradesh, Haryana, and Tamil Nadu are some of India's major leather producing areas.
Cotton weaving is a significant part of India's cottage industry, dating back to ancient times as it is the widely worn clothing across the country. It is known for its iconic designs and patterns by talented weavers made with their looms. India is one of the largest producers and exporters of cotton yarn. Some of the country's major cotton-producing states are Maharashtra, Gujarat, Madhya Pradesh, Rajasthan, Haryana, Punjab, Tamil Nadu, and Karnataka.
The art of carpet making was introduced in India by the great Mogul Emperor Akbar in the 1500s, bringing in Persian weavers along with skilled artists for the sole purpose of producing carpets in his palace. After India achieved Independence in 1947, the commercial manufacturing of carpets had a reawakening. Although the Kashmiri carpets are renowned in the world for their high quality, India also is famous for its coir mats and durries. The carpet-making industry in India is concentrated in Kashmir, Uttar Pradesh, Andhra Pradesh, Punjab, and Rajasthan. The Indian Government has set up the Carpet Export Promotion Council for marketing handcrafted rugs and different floor coverings from across India.
Metal has always been a key material to the Indian cottage industry used in making jewelry, figurines, and utensils. Metal handicrafts from India have an ethnic touch and are appreciated by people from around the world. The metal industry is a massive contributor to the overall economy in India.
Silk weaving is another important cottage industry in the country. India is one of the largest producers and silk users as people prefer wearing silk clothing on special occasions, including weddings and festivals. Some of the well-known types of silk produced in the country are Muga, Eri, Mulberry, and Tassore. Around 70% of the country's silk weaving industry has its base in Karnataka.
In general, the cottage industry is unorganized and operated as small-scale businesses. These businesses are run by individual operators or family members who produce goods by using conventional techniques. These types of businesses originate in the rural areas/small-urban areas where underemployment and unemployment are prevalent. Therefore, cottage industries drive the economy's growth by employing a large number of remaining workforces of the villages. However, the cottage industry cannot be viewed as a massive producer of goods. It faces massive competition from medium- and large-scale businesses that demand vast capital investment for advanced technologies.
- Problems Faced By Cottage Industries in India
The cottage industry is well-known for its huge potential for providing employment. However, in the last few years, employment opportunities may have heightened in this industry, but the income has certainly decreased as the marketers offer low prices to the manufacturers but take high ransom amounts from the buyers. In any case, it not just the dealers and the marketers. The updated foreign policies and globalization also accounts for the present scenario of the cottage industry. The handloom weavers are facing several issues from the power looms. The majority of the workforce in this sector has given their entire life to stitching and knitting, and their expertise is unmatchable. However, at present, they are earning the same amount at which they have started years back.
The cottage industry is huge, and it provides employment to a large section of our population. Given that more than 4 million people are associated with the handloom industry, such a situation proves the hardships that these people are experiencing. For that matter of fact, out of the total people associated with this industry, around 47% fall below the poverty line. And according to the new census, the average annual household income of these people is less than USD 1000. Since the size of the family is large among this section of the society, the per capita income is just a little more than nothing.
The majority of cottage industries in India face adversities in terms of capital and workforce, which results in them buying capital-saving techniques. Therefore, there is a dire need for the implementation of new strategies that not only drives productivity but also develops new skills and meets the prerequisites of the marketplace. Measures should be taken towards developing new technologies so that people can maintain a decent lifestyle. Moreover, the government should provide subsidiaries for the growth of cottage industries, particularly in the initial phases. The overall workforce of the industry often finds themselves fighting against all the odds at various stages of their business.
Top 5 Flourishing Cottage Industries Globally
An improved economic scenario may urge performers to take loans for self-promotion purposes such as acting reels or headshots. Potential marketing strategies can help self-reliant, creative artists build the necessary followers they need to launch their careers. An improved economic scenario may help give rise to new avenues for revenue growth over the next five years.
- Psychologists, Social Workers, and Matchmakers
The National Mental Health Association reported that two-thirds of adults and one-third of children in the U.S. require mental health assistance but do not receive it. An increase in insurance coverage as per the mandatory regulations for services provided by mental health professionals is expected to help psychologists address this unfulfilled need and grow such businesses.
Particularly, private practices can prove to be more opportunistic for individual operators, so changes in healthcare will provide an incentive for new businesses to expand. Small-scale businesses that are not backed by financial institutions will be more likely to seek out loans over the next few years.
The number of domesticated animals is expected to grow 2% annually over the next five years, which will push revenue growth for homepreneurs providing pet-related services. The opening of the business or expansion generally requires financial support. The industry’s low hurdles to open and employee skill requirements encourage organizations to enter the market without any hassle.
- Alternative Healthcare Providers
Healthcare mandates forbid health insurance companies from discerning against licensed alternative healthcare providers, so they are expected to benefit as individuals enjoy coverage for business services. Alternative healthcare providers consist of massage therapists, psychologists, yoga, and meditation therapists.
Since billing and coding for health insurance payments take time and are expensive, consolidation is likely to be expected so that larger operations are better able to perform these functions. While consolidating operators may look for small business loans, these companies’ operating profit will likely heighten from post-merger synergies.
As people are losing their jobs and faced with waning free time, the demand for professional event and party planning is increasing. This, in turn, will carve the path for more industry entrants, and the number of participants is expected to grow at a CAGR of 2.5% over the next five years. Business loans will allow event planners to employ more people and buy more supplies to cater to even bigger events.
Advantages and Disadvantages of the Cottage Industry
Back in the day, an important benefit of the cottage industry was that the majority of the world’s population did not live in urban areas, but rather in rural areas. Small family units were forced to be mostly independent and were responsible for producing the majority of their own food, clothing, and other products. This traditional system enabled family units to survive independently across a vast geographic region. The only urban areas to have existed were far away to reach on a regular basis to buy manufactured supplies or day-to-day items.
Since we live in a world where everything is available instantly, most cottage industries have long been replaced by the Industrial Revolution. Centralized production in manufacturing facilities usually produces the same quantity of items at a cheaper cost. In medieval times, an individual could spend far too many days manufacturing a product as they would start with minimal raw materials.
A team from the National Science Foundation estimated the energy saved by working from home. The relative consumption of energy at home compared to commuting is around 29 to 1 when driving a private vehicle, 11 to 1 when mass transit is used, and 2 to 1 mass transportation is used. In other words, if 1% of urban transportation is replaced by working at home, it would save around 5.4 million barrels of oil annually.
By the late 1800s, textile manufacturing was a large-scale industry. People left the small farming villages to live and work in cities where factory production flourished. Cottage industries were soon forgotten and replaced by industrialization, which would result in a far greater quantity of products at a cheaper cost.
However, despite the high manufacturing costs, cottage industries are still booming in many regions across the globe. In the countrysides, the industry offers employment and a means of survival. Even in the well-established countries, there is a growing demand from consumers for handmade artisan goods, including paintings and other art forms, which are usually crafted by cottage industries.
The Bottom Line
The cottage industry is one of the oldest of all the industries, which is now facing intense competition from medium- and large-scale businesses. Different traditional and indigenous products attract merchants from abroad. Some of the goods are more expensive than large-scale industry goods. In the cottage industry, there are no advertisements and promotional events to market the product.
Irrespective of the measures undertaken by government organizations, the industry is likely to face threats from medium- and large-scale businesses. The government should focus on updating the marketing strategies and online promotion as well as provide enough credit, technological support, and infrastructure. A good marketing strategy can increase the demand for a particular product from the cottage industry. In short, cottage industries can accomplish a lot, given the right support and foundation.