In India, forest based insect enterprises has never been linked up with any forest management activity, either as a forest conservation strategy or to reduce the poverty in forested area. This investigation indicated that when forest dependent people are associated with forest insect industry (FII) like forest sericulture, lac culture or apiculture; this income generating activity links livelihood with forest conservation, and generates a viable model of collaborative forest management (CFM). In this model different stakeholders work together as a coherent entity for unified goal of managing the forest for well-being of the poor people in fringe areas. Article summaries and evaluates the prospect of India specific forest insect industry, and discusses how and to what extent integration of FII could be a viable livelihood component in CFM to conserve the forest and insect biodiversity. We analysed a case study on forestbased rearing of tropical tasar silkworm rearing in Central India from CFM perspective. Arguments in this communication are intended to provide forest managers and policy-makers with necessary input to consider location specific FII in CFM mode to provide a continuous source of small income to forest dependent people to ensure long lasting success of their forest management endeavours.