A cottage industry is a small business engaged in manufacturing and operated from the owner’s homes. Cottage industries form an important part of the Indian economy. Being a developing economy, cottage industries create employment opportunities and drive incomes, preserve local customs and traditions and popularise them by producing unique local products, allow flexibility to owners and workers, and so on. This industry caters to multiple sectors such as handloom, handicrafts and textiles. Starting and operating a cottage industry business requires low capital and other resources, which allows many families to start such businesses. However, given the lower capital Investment, these industries operate using cheap and outdated technology. This may lead to higher costs as well as more time to produce a single unit. Due to this cottage industries face competition from larger firms using modern technology and efficient means of production.

Nonetheless, many cottage industries still stand strong. Products made by popular cottage industry businesses are recognised as a brand and known for their quality. Additionally, products made by machines and similar modern technology may lack the exquisiteness of some cottage industry products such as Banarasi saree, a popular cottage industry product in Varanasi. This leads to sustainability of demand, enabling growth in the industry.

As of 2020, around 65% of Indians were living in rural areas; of these, majority have low incomes and resources. Cottage industries are an important source of earning for them. These industries support many Indians, lifting them from poverty. Cottage industries also increase India’s export potential. Due to mainly these factors, the cottage industry is called the backbone of India’s economy.