For the rural economy of India, characterized by growing unemployment and poverty, the labour intensive economic activities like Khadi and Village Industries are deemed to assume greater relevance than ever. But the past trends of growth of this sector reveal that the pace of employment generation is largely determined by the external support it received than its internal viability. This paper brings to light that the low technology base has been responsible for the above phenomenon. The stagnation in the technology base has also been responsible for a meagre enhancement in the real wage earnings of the workers engaged in Khadi and Village Industries.