The Micro and Small Scale Enterprises (MSMEs) in Handicrafts form an important part of the Indian economy. Yet, in the post liberalization era since 1991, MSMEs have fallen considerably behind the national growth rate. Besides the economic threats from opening up the economy to competing global MNCs, and the government’s withdrawal of subsidies, several socio-cultural factors have also stymied the growth of these enterprises. Notable among them are the gradual westernization of culture, rural education, urban immigration and the changing gender and generational relations in artisan families. This paper focuses on one such micro scale handicraft industry in rural North East India (Assam), namely, the Kuhila craft industry and studies the challenges that this industry is facing in economic, social and cultural fronts. It also investigates the effects of environmental changes and its ability to pose as a potential threat to this industry in future.