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Class : 11
Unit : Economics


Explain th problem of cottage and small scale industries in Nepal.

Ans : The development of Cottage and small scale industries is very low. Due to low level of saving, people can’t invest the large amount of money in industries. And those small scale industries which are running are unable to achieve satisfactory progress. The problem faced by the Cottage and small scale industries are discussed below: i) Lack of capital:- The entrepreneurs have skill and other resources but along with that adequate capital is required for the development of Cottage and small scale industries. They do not have enough capital to mobilize the industries. As a result, the Cottage and small scale industries could not be developed. ii) Lack of credit facilities:- The major problem of Cottage and small scale industries is not availability of credit facilities. The banks and financial institution do not provide loan to such industries due to poor repaying capacity. And given financial institution are not ready to provide credit on low rate of interest. iii) Unable to compete with large industries:- Cottage and small scale industries are using traditional technology for the production of goods. The produced goods are of low quality and more expensive as compared to the goods produced by large scale industries. Therefore these industries are unable to compete with large industries. iv) Lack of skilled manpower:- The Cottage and small scale industries cannot employ qualified managers and engineers because they cannot pay highest wages. And the use of unskilled labor reduces the quality of product. v) Lack of raw materials:- The small producers do not get enough raw materials. They are generally provided by lower quality raw materials. The goods become expensive when raw materials are imported from other country. This makes them less competitive in both domestic and international market. vi) Lack of transport and advertisement:- Transport And advertisement both are most essential factor in order to develop these industries. Due to the lack of facilities, consumers are unaware about their product. So the demand of the product could not be increased. vii) Limited market:- The market system has not been developed in Nepal. The size of market is small and there is open border with India too. There is influe of cheaper and superior goods in the foreign market. These industries cannot compete with Indian product within its on boundary. viii) Lack of protection:- The Cottage and small scale industries of Nepal have been competing with the important products. Neither there is adequate tariff protection nor has subsidy been provided by the government to these industries. Discourages the small scale industries. ix) Intermediaries exploitation:- The purchasing capacity of Cottage and small scale industries are low. Due to this, they cannot afford marketing of the product at huge level. So they compelled to sell their product to intermediaries and major proof it is taken by intermediaries.
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