Cottage Industry is a specialized form of small scale industry where the production of the commodity takes place in the homes and the labor is supplied by the family members only. The machineries or means utilized for the production of the commodities generally are the common ones used at homes. The basic characteristic feature of Cottage Industry is that it is basically unorganized in nature and come under the group of small scale industry type.
The commodities that are being produced by these industries are basically consumable ones and are produced through the utilization of the traditional techniques. Cottage Industry especially started its function in the country sides of a country where unemployment along with under-employment are prevalent. Thus, this industry helps the economy by absorbing a huge amount of surplus labor of the rural economy. Another glaring feature of Cottage Industry is that it is not a mass producer of commodities.
The main risk that is being faced by this industry is from the factory based medium or large industries which are again capital intensive in nature. This is because of the fact that these large industries utilize all sorts of cost effective technologies which enable them to supply the products at low price. On the other hand, the Cottage Industry is basically labor intensive and utilizes traditional techniques in production process which are generally not cost effective in nature which escalates the price of their product. The products supplied by the Cottage Industry thus face risk of extinction if they don't receive enough financial or other form of support from the government.
Cottage Industry is often characterized by its enormous potential for employment generation and the person getting employed is basically regarded as a self-employed one.
It has been empirically found out that Cottage Industry has given economic independence to the women in the developing as well as developed countries.
The most common form of support extended by the governments towards this industry is through forwarding of capital subsidies.