Cottage Industry is a form of small scale industry where the productivity of the good£ takes place in the houses of the workers, and the workforce include the members of the family. The equipment’s used to generate products are not the hi-tech ones but generally those which are used at homes.
Cottage industry is generally unorganised in character. The units use conventional methods of production. These types of industries originate in the rural areas where unemployment and underemployment are widespread. Cottage industries; help the economy by engrossing a massive amount of remaining workforce of the rural areas. However, cottage industry cannot be considered as the mass producer of products. It faces major risks from medium or large industries which demand huge amount of capital investment for all types of hi- end technologies.
Cottage industries in India face dearth of capital and large quantity of labour, which force them to buy capital-saving techniques. Hence, there is an urgent need for implementation of techniques which not only enhances productivity but develops skills of the labourers and meets the requirements of the local market.
Problem of Finance
Finance is a key input of production, distribution and development. But considering the vital role, finance plays in accelerating the process of small scale industries development, the total amount of loan sanctioned to it forms a very insignificant part of the total loan to Indian Industry because of inadequate credit of the viability of the unit is affected greatly and its result in their sickness and ultimate closure. The flow of credit to the small scale sector is affected because of a weak financial base, which eventually prompts the entrepreneurs to bring in funds by way of loan rather than capital, improper maintenance of books of account, inability to provide collateral security, delay in payments by the larger units, lack of appreciation of financial data required by banks or financial institution etc., the administrative cost of lending to small borrowers, high mortality rate or sickness amongst the SSI units, the concessional interest rate does not motivate the financial institutions intrinsically to invest in SSI unit etc.
Marketing is an important factor for the survival and growth of firms. It is the place where goods and services are bought and sold. In India, in spite of the vast domestic market, marketing remains a problem area for the small-scale sectors. Marketing has been identified as an important aspect affecting smallscale industries performance. Besides finance, marketing is the key element which, if not pragmatically assessed leads to the closure of the units.
The main problems of marketing in the Indian small scale sectors are product quality, service to customers, cost effectiveness, consistency and reliability adherence to delivery schedules, lack of proper market information and the mindset of entrepreneurs.
Problem of Infrastructure
One of the most important components of industrial development is infrastructure. Infrastructure bottleneck retard the growth of industries in a region. And small-scale units are being constrained by inadequate physical infrastructure in which most severe constraint is power. In many states of India problem of power affects the grov^lh of SSIs. Similarly the problems of transportation and communication infrastructure disturb the growlh of SSIs.
Problem of Management
The inefficient management is very inherent in the SSI because in most of the cases the entrepreneur looks after various causes ranging from accounting to marketing as well as production. There is no division of labour. The most of the industrial units fall sick because of poor management, dissention within management.
Problem of Technology
For small-scale sector units, technology is also an area of challenge. Inadequate attention to technology upgradation has acted as a hindrance on the way of modernization of SSIs factors. Most of the units are still carrying on with obsolete technology.
Because of lack of education and over-population most of poor families surrender their children’s childhood to the darkness of SSIs. Child labour means cheap labour, the young even the very young are often the most employable. Child labour is a glaring feature of the SSIs of U.P. More than 50,000 children do most of the polishing and packing job.
Lack of skilled personnel
Sometime lack of skilled personnel creates the problem for the development of SSIs. In this district most of the personnel who indulge in the production process are unskilled. This is because there is a dearth of skilled personnel suited to the requirement of SSIs.
In addition to these problems other problems may be delayed payment by the large scale units to SSIs, problem of raw material i.e. inadequate irregular supply of raw material, lack of organized market channels, unorganised nature of operations, imperfect knowledge of market operations, problem of sickness, inadequate data base for the small scale sector, burden of local taxes, competition from large scale industries, nonavailability of cheap power etc. So, these are some of the problems, which directly affect the growth, and development of SSIs.
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