Cottage Industry in Pakistan: Purpose, Scope, and Impact

This report provides a comprehensive overview of the cottage industry in Pakistan. It begins by defining the purpose of cottage industries, highlighting their role in providing employment, particularly for women and disabled individuals, and their contribution to the national economy through increased income and exports. The report then delves into the sectors in which these industries operate, primarily the private sector, and the key questions faced by private owners, such as what to produce, how to produce, and for whom. It examines the variety of goods produced, including cutlery, surgical instruments, and other items, and discusses the size and scope of these industries, emphasizing their labor-intensive nature and the challenges they face. The legal structures of cottage industries, including sole proprietorships, partnerships, and private limited companies, are also analyzed. Furthermore, the report identifies the key stakeholders, namely employees, the government, and customers, and stresses the importance of maintaining positive relationships with these groups. The conclusion underscores the importance of the cottage industry for Pakistan's economy, advocating for government support through subsidies and checks to ensure ethical practices, such as banning child labor, and promoting both small and large-scale industries. The report emphasizes the potential of cottage industries to boost exports, fulfill local needs, and improve the balance of trade.

1. Purpose of cottage industry
A cottage industry is small scale manufacture often operated out of a
home with less investment. They main objective is to earn profit with
less investment and some cottage industry is set by NGOs they aim is
also profit but main aim is to give jobs to disable people and to woman
to increases woman power in a society. In Pakistan cottage industries
help to create opportunities of employment for many people in rural
and urban areas. Which help to reduce the unemployment rate in a
country from which it helps to increase income level of people by which
people purchasing power increases which result an increase in GDP of a
country. Pakistan cottage industry product is highly demanded in
international market. According to some estimates Pakistan receives
one third of its total foreign exchange of manufacturing sector only
though the export of cottage industry.
Woman in Pakistan are mostly remained idle and unproductive at home
in rural areas, but they can be involved in cottage industry which can be
established at home easily, and they can earn huge economic benefits
to whole family by selling the product in the local market or in
international market by exporting them. By selling the product in the
local market it will fulfillment the local needs peoples by which demand
for imported product will reduce which help to decrease import burden
and will save much need foreign exchange.
2. Sector they operate in
The cottage industry is mostly operated in private sector. Private sector
is part of the economy that is run by a single owner or more than one
owner. The main aim in private sector is to earn maximum profit. There
three question which is face by private sector owner What to produce?
How to produce? And for Whom to produce? In what to produce they
produce the product which is highly demand in market. In how to

produce they will use the method which gives less cost of production
which will help to the control the cost of business. Whom to produce
the cottage industry will produce for everyone for upper class and
middle class because they aim is to have more market share than other,
and they main aim is profit maximum.
3. Different types of goods produce in cottage industry
There is a large variety of goods produce in cottage industry. Some
cottage industries produce imported items Which is highly demanded
in the international market, and they also serving the need of local
people. The variety includes cutlery and surgical instruments. Cutlery
industry is growing day by day and wazirabad is a city which is well-
known by its cutlery items which is highly demanded in international
market due its high quality.
Pakistan has less competitor in surgical instruments in international
market. The city of Sialkot is very well-known particularly in Europe for
its surgical instruments because firstly it is made by handmade which
has higher quality than the machine made. No other country can match
the quality of surgical instruments which are made in Sialkot.
4. Size and scope of cottage industry
The cottage industries are mostly small-scale industry and mostly
home-based units of production which relies on human skilled, and
they mostly used labor-intensive which is cheaper than the capital
intensive and when people are employed in villages the migration of
people from rural to urban areas will reduce. But however, there is
large number of competitions in cottage industry because, in cottage
industry anyone can set up their business in large scale or small scale,
but however small-scale business has to face difficulties to sustain in

the competition with large businesses, and they work in small market
from which there is less scope for the organization to changes their
management strategy randomly. By more competitors could damage
small scale cottage industry significantly.
5. Legal structure of cottage industry
The legal structure of cottage industry is in the form of sole trader,
partnerships and private limited. Sole trader is a single owner who run
his business, and he doesn’t share profit with anyone. Partnerships is a
form of business where two or more people get together to start the
business while sharing capital and profit. Mostly cottage industry is set
by the sole traders because the cottage industry needs less investment
and a single person can set up easily and if a person doesn’t have
needed investment than he can form a partnership with another
person in which they will be sharing the capital and profit and sharing
of responsibility between partners and something that cannot be done
in a sole proprietorship. On the other hand, partnerships/sole trader
has unlimited liability which mean if they have taken loan from bank
and if they are unable to pay back the loan to bank than bank can force
them to sell their personal assets like houses and cars to pay the loan
back.
If the cottage industry owner/partner want to expand the business than
they can form a private limited company in which they can sell the
share to family member. Moreover, the shares cannot be sold publicly,
and they cannot list their shares on the stock exchange.
6. Key stakeholder of cottage industry
Stakeholder is a member or group that has an interest in a company,
and they can affect or can be affected by the business. The key

stakeholder of cottage industry are employees, Government and
customer. The most important the stakeholder of cottage industry
employees and customer. If cottage industry is enabled to provide
better working conditions, and job security and paying low wage than
the worker can form a trade union. Trade union is an association of
worker who come together to protect their rights and interests, and if
their right is not fulfill than they can go on strike and all production will
be stopped and cottage industry mostly uses labor-intensive and if
production is stop than all order will be delayed. That’s why cottage
industry should develop better relation with workers.
The customer is the most important part of industry without the
customer business can’t be survive in the market. If industry is unable
to provide what customer want than the sale will reduces that why the
cottage industry should have developed research and development
department to know what customer want or need to fulfill the demand.
7. Conclusion
Cottage industry is also important has much as other industry in
Pakistan. Firstly, it can easily set-up in houses and woman can be
employed which help to increase active labor force in Pakistan. If
government support cottage industries by providing subsidies from
which they can expand the business and more people can be employed
by which total income level would increase from which they have to
pay income tax which will help increase the total tax revenue. By giving
the subsidies to cottage industry will help to improve the quality of
product like cutlery and surgical instruments and sport goods, etc.
Which will make them more competitive in international market, and it
will boost the total sale. More sale will help to increase the export of
Pakistan, and it will fulfill the demand of local people as a result export

will improve and import will decease which will lead to improve
balances of trade.
But however, government should have check and balance on the
cottage industry because in rural areas there are many cottage
industries which use child labor and the government should have
proper ban on child labor.
Government should support both industry small scale and large scale in
Pakistan.