Product Profile- Leather Industry
Leather is one of the most widely traded commodities globally. The growth in demand for leather is driven by the fashion industry, especially footwear. Apart from this, furniture and interior design industries, as well as the automotive industry also demand leather. The leather industry has a place of prominence in the Indian economy due to substantial export earnings and growth.
India’s leather industry has grown drastically, transforming from a mere raw material supplier to a value-added product exporter. The Indian leather industry accounts for around 12.9% of the world’s leather production of hides/skins.
The country ranks second in terms of footwear and leather garments production in the world and accounts for 9% of the world’s footwear production.
Total leather good exports from India stood at US$ 1.36 billion during 2017-18. The major markets for Indian leather products were:
In 2017-18, leather footwear component, leather garments and finished leather exports stood at US $340 million, US $519 million and US $874 million respectively.
Footwear export accounts for 49% share of the leather export- a product mix with gents (55%), followed by ladies (35%) and children (10%). With an annual production of 2065 million pairs, a huge domestic retail market exists.
According to the latest available data, the leather industry declined more than 3% in financial year 2016-17 and 1.30% in the first quarter of 2017-18, compared to a growth of more than 18% in 2013-14.
Environmental issues coupled with raw hide bottlenecks over the past decade have also pushed the leather industry to the brink. Some leather goods manufacturers have even started importing finished leather from other countries, including Brazil, Pakistan and Bangladesh, to maintain their supply chain and hedge against occasional shutdown of tanneries. Also the ban on cattle sale for slaughter has hit the once-flourishing leather industry and its poorest employees. The recent Economic Survey 2017 rightly pointed out that the tax and tariff policies in the country create distortions, particularly in the leather and apparel sectors.
The major reason for this stagnation in exports has been the lack of competitiveness. Faced with strict labour regulations, low skilled workforce, high costs of technology and infrastructure and above all, a complex structure of taxes and tariffs, domestic manufacturers often find it difficult to compete in the international market.
There is still no concrete action plan of the government to keep the industry afloat as it transitions to a more eco-friendly platform. The incentive package for leather exporters are set to be introduced amidst the new tax regime and it should aim at providing enough incentives for the leather manufacturers so as to offset distortions brought about by the rise in costs.