The Leather Industry

8/10/2019 The Leather Industry

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The leather industry has huge potential in India. The footwear segment, for instance, is

poised to grow manifold with the rise in disposable income of the middle class, as will

the demand for leather goods.

Export prospects have also brightened considerably, especially since Chinas leather

exports have been stagnating and production has fallen in Western Europe.

The industry has set a trade target of US$ 12 billion by 2012, including exports

worth US$ 7 billion and domestic sales worth US$ 5 billion.

According to a 2006 estimate, the leather industry employed directly and

indirectlyaround 2.5 million people, and is expected to create another 1 million

jobs by 2010. The primary sector - hide/skin collection, tanning, finished leather

and finished products - employs almost 92 per cent of personnel as opposed to

the 8 per cent jointly employed by the secondary and tertiary sectors.

During Aril-December 2007, exports of leather and leather items touched US$

2485.58 million as opposed to US$ 2258.81 million during the same period in

2006, registering a growth of 10.04 percent, according to the Council for Leather

Exports (CLE) estimates.

During April-November of 2007-08, leather footwear exports grew by 18.72 per

cent to US$ 696.10 million from US$ 586.32 million. During the same period,

exports of footwear components increased by 29.10 per cent from US$ 142.54

million to US$ 184.01 million.

India is expected to export leather and leather goods worth US$ 7 billion by the

year 2010-11, according to Mr Kamal Nath, Commerce & Industry Minister.


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However, to meet this target, the industry must create additional capacity and

maintain an annual growth rate of 20 per cent.

Some of the constraints slowing down the progress of this industry are lack of

FDIthe industry accounted for a meagre 0.15 per cent of the total FDI inflow in

2006; lack of technical expertise and competition from the Chinese leather

industry.

In recent times, the unprecedented appreciation of the Indian rupee against the

US dollar has put the sector under tremendous strain. This has slowed down

investments and led to a loss in employment.

The industry has also been dogged by environmental issues. In the leather

tanning and finishing stages, various chemicals that are used are polluting and

have been banned by some importing counties, thereby adversely affecting

exports to those countries.

Policy Initiatives

Recognising the potential of the leather industry and keen to take the industrys share to

4 per cent of the world trade by 2010, the Government of India has taken certain policy

initiatives.

Foreign equity up to 100 per cent is allowed, subject to certain conditions.

Foreign equity up to 51per cent is accorded automatic approval in several key

areas.

Investments over 51per cent equity participation are approved on a case -to-

case basis by the Foreign Investment Promotion Board (FIPB). Clearance of

proposals by the FIPB takes around six weeks on an average.


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Foreign investors need not have a local partner.

Free repatriation of profits and capital investment is permitted, except for a

shortlist of specified consumer goods industries

Apart from these steps, the Union government commissioned a Tannery Modernisation

Scheme in 2006 and another scheme for footwear and leather products. The scheme is

expected to be implemented at a cost of US$ 71.21 million. The government is also

encouraging the setting up of footwear parks/complexes to enhance production

capacity. During the 10th Plan, the government provided financial assistance to build a

Footwear Component Park and a Footwear Complex at Chennai, and provided

marketing and training assistance to artisans and primary workers. The government

also proposes to build a footwear park, a tanning complex, a leather goods park and

two footwear component parks for the leather industry, all by 2010.

Documents

The Leather Industry