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By: Sanjeev Keswani
The University of Findlay
Ohio, USA
Small Business Exports from India: A look into the leather Footwear Industry
In the sixties, India was know for its Leather Raw Material export
Today it is the major player in the finished goods sector of the market.
In the Leather Industry, leather footwear takes a bigger share of global trade & is also the backbone of the Leather Industry
It is ranked highly alongside the other top six foreign exchange earners of the country
India exports 55% of their total leather footwear to Europe, U.K , USA, Australia & Africa& ranks 2nd after China
Brief Introduction of the Industry
The Indian footwear factories have also achieved certification for ISO 9000, ISO 14000 & SA 8000(International Human Rights), (LeatherIndia.org, 2010).
Currently the average growth rate estimate is 12%. The skilled and unskilled workers consist of nearly 50 % of the
total workforce. Direct and Indirect employment figures are approximately 2.5
million, with 30% of that figure being women. It has especially given employment to women in the Southern
part of India. (Global Economic Summit, 2011).
footwear & footwear
components
tanning & finishing
leather garments
leather goods
including saddler &
harness, etc
The main cities and states :
In India, the cities of Ambur,
Ranipet, Vaniyambadi,
Trichi, and Dindigul, are key
production sites for the
leather industry. Also
included in the list are the
states of Chennai, Tamil
Nadu, West Bengal, Uttar
Pradesh ,Karnataka and
Andhra Pradesh. There are
more than 4000
Manufacturing units
The Structure of the Leather Industry is quite separated. It is spread into segments, which are as follows:
Indian Leather Footwear Industry
India produces and exports :ballerinas, booties, huaraches, tennis shoes, sandals, moccasins, dress and casual shoes
Most manufacturers of modern footwear in India have established brands in Europe and Australia & Africa that they are supplying to.
Facts & Figures Cont
Tanning and Finishing capacity
The tanning and finishing capability for refining millions of
pieces of hides and skins annually is scattered among different
parts of the country
The duty free (tax free) import of hides and skins from all over
the world is a sign of strength and stability
This is attracting for foreign companies looking to relocate.
Facts & Figures Cont..
Indian Leather Goods IndustryGermany is the major market for India’s leather goods at
14.45% followed by USA, UK, France and ItalyCows, Sheep, Goats and Buffaloes majorly account for this
Industry.
Facts & Figures Cont…
Established in 19th Century, with the major buyers being the Military and Police. India is 3rd biggest market of saddler and harness goods.
There are 150 plants in an organized sectorThere are roughly 105 export oriented unitsThe major producer of Saddler is Uttar PradeshThe Major consumers :Germany, U. K, USA, France,
Netherlands, Japan, Australia and New Zealand. (leatehrindia.org, 2010).
Facts & Figures Cont….
Indian Garments IndustryIn the mid 1980’s Indian leather Garment Industry entered the
world of garment exports. Exports of $ 475 million are done as per 2011. (Apparel-
India.com)Germany is the major destination of the leather garments
exported from India
Facts & Figures Cont…..
Hides-65 million piecesSkins- 170 million piecesLeather Footwear- 909 million pairsLeather shoe uppers- 100 million pairsLeather garments- 16 million piecesLeather goods- 63 million piecesIndustrial gloves- 52 million pairsSaddler- 10 million pieces
Facts & Figures Cont……
Strengths
Elevated GrowthReadily available, highly skilled, and cheap labor forceSignificant raw material availability(base)The initiatives taken by the Government for the change in the
PoliciesCapability to incorporate new technologies required and to
handle large projectsEmphasis is given to continuous design up gradation & product
development
SWOT Analysis of the Indian Leather Industry
Weaknesses
Lacking support from the government in terms of warehousing The fluctuation in International pricingThe large size of work force are resulting in increased wages Lacking strong presence in the global fashion marketMany unaware of international standards
Opportunities
Potential to accelerate in the domestic marketCultivating fashion awareness globallyUsing decision support software(DSS)Software Asset Management (SAM,SAP) &
information technology would help in eradicate the length of the production cycle required for different products
Threats
Industry is unorganized in major partsThe scope is limited for mobilizing funds through
public issues & private placements (many of the businesses are owned by family)
The difficulty of retrieving bank loans is resulting in costly private borrowing.
Pollution control devices have been installed into more than 95% of the Indian Tanneries.
There is a Special Task force to look into minimization the techniques and control of pollution
Eco Friendly products are being used which can be reused and recycled. They have an “ECO-LABEL” on every box.
Environmental aspects of the Leather Industry
There is Funding support that is provided for market development activities, export promotion, technological modernization & up gradation for production units.
The entire leather sector is now de-licensed for facilitating expansion in terms of modern lines with equipments & state-of-the-art machinery.
There is 100 % Foreign Direct Investment &Joint Ventures permitted
Importing the specified machinery required in leather & footwear industry is allowed at a 5% concessional on import duty.
Duty free import for specified critical inputs required for manufacturing the other leather products & leather garments including footwear under Duty Free Import Scheme (DFIS).
Government Policies to Support the Industry
There are simplified import/export procedures, e.g. quick customs clearances.
There is a program held for giving support to international market of the Leather Footwear products: known as
Market Development Assistance (MDA)FMM &T ( footwear materials, Manufacturing & Technology)
Program & IILF (India International Leather Fair) are great events to gain new opportunities in the industry; also to discover fresh ideas. The industry events provide a good chance for individuals seeking out their newest competitors, the latest trends, & sophisticated leather products and services
Government policies to Support the Leather Footwear Industry Cont.
Tax benefits for the Software Technology Parks of India (STPI) and Export-Oriented Unit (EOU) have been extended till end 2011 which was going to end In March, 2011.
ECGC (Export Credit Guarantee Corporation) provides protection against nonpayment of the exported goods to the importer.
Draw backs are available on a pair bases for the exports, they are as follows: Rs 39 or 9% whichever is lower.
2% annual waver on the interest paid on the packing credit facility at the end of the year.
Government policies to Support the Industry Cont..
Data taken from : Index Mundi & Trading Economics
Data 2005-2006 & 2006-
2007(% change)
Data 2006-2007 & 2007-
2008(% change)
Data 2007-2008 & 2008-
2009(% change)
Data 2008-2009 & 2009-
2010(% change)
Data 2009-2010 & 2010-
2011(% change)
Data 2010-2011 & 2011-
2012(% change)
Data 2011-2012 & 2012-
2013(Expected% change)
-20.00%
-15.00%
-10.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00% USA % Change (Leather Footwear)
USA
Data taken from: LeatherIndia.orgDat
a 20
05-2
006
& 2
006-
2007
(% cha
nge)
Data
2006
-200
7 &
200
7-20
08(%
cha
nge)
Data
2007
-200
8 &
200
8-20
09(%
cha
nge)
Data
2008
-200
9 &
200
9-20
10(%
cha
nge)
Data
2009
-201
0 &
201
0-20
11( %
cha
nge)
Data
2010
-201
1 &
201
1-20
12( %
cha
nge)
Data
2011
-201
2 &
201
2-20
13 E
xpec
ted
% cha
nge)
Data
2012
-201
3 &
201
3-20
14 E
xpec
ted
% cha
nge)
Data
2013
-201
4 &
201
4-20
15( E
xpec
ted
% cha
nge)
Data
2014
-201
5 &
201
5-20
16( E
xpec
ted
% cha
nge)
Data
2015
-201
6 &
201
6-20
17( E
xpec
ted
% cha
nge)
Data
2016
-201
7 &
201
7-20
18( E
xpec
ted
% cha
nge)
Data
2017
-201
8& 2
018-
2019
( Exp
ecte
d %
cha
nge)
Data
2018
-201
9& 2
019-
2020
( Exp
ecte
d %
cha
nge)
Data
2019
-202
0& 2
020-
2021
( Exp
ecte
d %
cha
nge)
-1000.00%
0.00%
1000.00%
2000.00%
3000.00%
4000.00%
5000.00%
6000.00%
7000.00%
8000.00%
9000.00%
Trend in India’s Export of Leather & Leather Products to difference coun-tries during April-January 2005-2019
% change
Merchandise Import & Export USA (%)
Standard of
Living In USA
Factors for Growth in Demand
Data taken from Index Mundi & Trading Economics
References (N.A), 2011. Delhi: Export Scenario. India International Leather Fair. Retrieved from http://www.iilfleatherfair.in/website/export_scenario.html
(N.A), 2010. Leather Industry of India. Article base. Retrieved from http://www.articlesbase.com /international-business-articles/leather-industry-of-india-2744752.html#axzz1Q3xZohL7
Dicosta, A, 2010. The Rise and Growth of the Indian Leather Industry. WorkOnInternet. Retrieved from http://www.workoninternet.com/business/investment-financial-strategy/46539-indian- leather-industry.html
(N.A), 2010. Analysis of Export Performance of the Leather and Leather products. Council of Leather Exports. Retrieved from http://www.leatherindia.org/export-analysis-apr-jav-2011.asp
(N.A), 2011. Finished Leather goods export on rise. Priyodesk. Retrieved from http://www.priyo.com/business/2011/03/19/finished-leather-goods-export-22159.html (N.A), 2011. Social Accountability 8000-SA8000. Mallenbaker. Retrieved from http://www.mallenbaker.net/csr/CSRfiles/SA8000.html
(N.A), 2011. India To Export $ 285 Bn Leather Goods. Cybex Retrieved from http://www.cybex.in/exim- news/India-To-Export-825-Bn-1095.aspx (N.A), 2010. Foreign Trade Policy. Department of Commerce. Retrieved from http://commerce.nic.in/publications/anualreport_