Child labour is widespread in home-based manufacturing activities in the informal sector in most developing countries. However, very little is known of child labour in industrial outwork. The aim of this paper is twofold: on the one hand, to understand whether children in home-based work households are more likely to work than other children and, if so, how this impacts their capabilities; and, on the other, to outline policy implications for India. This paper draws on ad hoc surveys and a country study carried out in India. It examines the incidence of child work in such households, the child's schooling, and reasons why children are working, their work conditions, and gender issues. Econometric analysis is applied to analyse the determinants of child activity status. Policy implications are spelled out at the end.