No doubt small scale industry has great importance in economy but unfortunately this sector was neglect in the past.Following are the main problems of cottage or small industries :
1. Lack of Finance :-
The cottage and small scale industry is facing the problem of capital shortage. The financial institutions are not ready to provide the credit on low rate of interest. It is an obstacle in the ways of small scale industry development.
2. Competition :-
There is a stiff competition between the large scale industry and small scale industry and usually small scale industry suffers a loss.
3. Import Policy :-
The import [policy of the government is also not favorable for the small scale industry. It discourages the small scale industry.
4. Smuggling :-
Smuggling of large scale consumer goods from Russia, Iran and Singapore has also discouraged the small scale industry.
5. Problem of Raw Material :-
The owner of the small scale industry can not get enough raw material what he wants. Poor quality of raw material is provided on higher prices to the small industry.
6. Old Methods of Production :-
Small industries use old machines and old methods of production. Due to this the quality of small scale industries product is very poor. So they are helpless to sell the product at low rate.
7. Lack of Marketing Facility :-
The marketing facilities are inadequate in the country. The small and cottage industries are selling their product at the low prices in the hands of middleman. Even they can not advertise their product on T.V because they have not sufficient capital for this purpose.
8. Lack of Qualified Staff :-
The cottage industries can not employ the qualified engineers and economists. It reduces the quality of product.
9. Shortage of Electricity :-
There are a large number of villages where electricity is no available. The non availability of electricity is an obstacle in the way of small scale industries.
10. Breakdown of Electricity :-
The regular break down of electricity has also affected the production of small scale industry adversely. Prices of electricity are also rising day by day. Higher prices has increased the cost of production.
11. Lack of Standardization :-
The mixing of good and bad product creates problems of marketing inside and outside the country. The product is not standardized.
12. High Cost of Production :-
The mostly cost of cottage industry is very high. Because the process of production is very slow and raw material is also bought at higher prices. Rates of electricity charges are also increasing.
13. Entrepreneur is Uneducated :-
Mostly cottage industries are owned managed and controlled by literate people. They follow the old methods and production remains very low.
14. Lack of Roads and Transport Facilities :-
There is a lack of roads, transport, water supply, electricity and telephone facilities for the small scale industry. When infrastructure will not be available how those can flourish.
15. Lack of Storage Facilities :-
The small scale industry in particularly in villages is lacking storage facilities. A huge product is wasted due to the problem.
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