LEATURE INDUSTRY

Introduction
The Indian leather industry enjoys a predominant place in the Indian economy and has been a
major contributor to export earnings. India has an abundance of raw materials with access to
20% of world’s cattle and buffalo and 11% of the world’s goat and sheep population.
Globally, India is the 2nd largest producer of Footwear and 2nd largest exporter of Leather
Garments. India’s leather industry is set to grow exponentially over the next five years with a
growth target of 50% in exports from 2016-20. Per capita consumption of footwear in India is
projected to increase and total domestic consumption is expected to reach up to 5 billion pairs
by 2020. The industry is highly labour intensive and employs around 3 million people out of
which 30% are women. The sector has a potential to generate 250 jobs for every INR 1 crore
investment.

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.
The Indian leather industry accounts for around 12.93 per cent of the world’s leather
production of hides/skins.

Export highlights
India’s leather industry has grown drastically, transforming from a mere raw material
supplier to a value-added product exporter.

 Total leather good exports from India stood at US$ 1.36 billion during 2017-18.
 During 2017-18, the major markets for Indian leather products were US (24.48 per
cent), Germany (14.76 per cent), UK (10.94 per cent), Italy (5.82 per cent), Spain
(5.87 per cent), France (5.07 per cent), Netherlands (4.86 per cent), Australia (3.41
per cent), UAE (3.10 per cent) and Denmark (2.59 per cent).
 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
COUNCIL FOR LEATHER EXPORTS
The Council for Leather Exports (CLE) is an autonomous non-profit organisation, which is
entrusted with export promotion activities and the development of the Indian leather industry.
About 3,500 companies manufacturing/exporting leather and leather products are members of
the Council.
 HISTORY OF LEATHER

Leather is one of man’s earliest and most useful discoveries. Our ancestors used leather to
protect themselves from the elements. Primitive man hunted wild animals for food, then
made clothing, footwear and crude tents from the hides. Like then, hides used today are a by-
product. Animals are raised for the meat, dairy and wool industries, not for their hides.
Roughly half of all leather produced today is used to make shoes, and about 25% for clothing.
Upholstery demands only around 15% of the total product.

Wall paintings and artifacts in Egyptian tombs dating back to 5000 B.C. indicate that leather
was used for sandals, clothes, gloves, buckets, bottles, shrouds for burying the dead and for
military equipment. The ancient Greeks are credited with developing tanning formulas using
certain tree barks and leaves soaked in water to preserve the leather. This was the first record
of vegetable tanned leather, which became a well-established trade in Greece around 500
B.C. Vegetable tanned leathers are still produced today and remain an active ingredient in
modern tannages. The Romans made extensive use of leather for footwear, clothes, and
military equipment including shields, saddles and harnesses.

Due to its durability and comfort, leather has been used for seating throughout the history of
transportation and furniture. It has always been the ideal material for making saddles and
tack, as well as footwear. During the Middle Ages, leather became the cover of choice for
dining chairs, because it was easy to maintain and did not absorb the odor of food. The spread
of industrialization in the 18th and 19th centuries created a demand for new kinds of leathers,
such as belting leathers to drive machinery. The invention of the automobile, the demand for
softer, lightweight footwear with a fashionable appearance, and a general rise in the standard
of living created a demand for soft, supple, colorful leather. The traditional vegetable tanned
leather was too hard and thick for these requirements and thus, the use of chromium salt was
adopted and chrome tanning became the standard for modern footwear, fashion and
upholstery leathers.

Modern technology has allowed for innovation in the leather industry, as the development of
chemicals and sophisticated processing methods have greatly expanded the aesthetics and
feel of leather as well as the possible applications. Leather continues to be the material of
choice, not just for commercial and residential furniture but for automotive, aviation and
marine applications as well.
 THE POWER OF GROWING TALENT INSTEAD OF BUYING IT
Growing talent in-house gets a management buy-in
Why it is beneficial to grow and nurture talent within the organisation instead of sourcing it
externally
Conventional talent management practices across organisations have focused on recruiting
the right talent at the right place, with regular monitoring to benchmark performance. In
today’s scenario, workforce management has gone a step ahead to include designing,
implementing, and measuring global people strategies to achieve success in business
operations. As HR managers embark on this mission to define and deploy robust people
management strategies, they are faced with one important question: should talent be grown
in-house or should it be heavily sourced from external environments? What are the
ramifications and the business/financial impact of each strategy?
Detailed assessment of current business and people scenario

Before arriving at a decision of whether to grow talent in-house or source them from outside
the organisation, HR managers need to evaluate the current human resources framework,
taking into account the specific capabilities of existing employees and matching these with
the requirements of the business. HR heads should ask the following key questions before
planning their task force management initiatives:
 Are any of the internal employees equipped with the necessary skills required for this role?
 Would there be adequate time to train and develop an in-house resource to take full
responsibility for this role?
 Should a resource be expected to learn and imbibe all the specific skills necessary to execute
this role satisfactorily, within the time available?
 Is there any room for low productivity in the teething phase of this project?
 Would the cost of training a resource be affordable?
Advantages of growing talent in-house
The very premise of talent management is to identify and grow the organization’s internal
resources so the business has the requisite talent necessary to execute mission-critical
projects. HR needs to build a steady resource funnel of experienced and skilled employees,
which can help in making informed recruitment decisions in the event of a churn. Recruiting
people in-house and training them to meet the requirements of the business can prove
beneficial on several counts.
Improved financial performance
Research has proved that recruiting people internally, especially in senior level roles has a
direct and positive impact on the company’s financial performance. Banking on the internal
resource pool to fill in executive roles enables seamless conduct of business operations as
there is no loss of focus on training and mentoring a new recruit. The business continues to
function as before, laying full emphasis on maximising productivity and financial gains.
No need to reinvent the wheel

A long-term employee of an organisation will have an in-depth understanding of the business

objectives and internal systems and processes. Moving current employees to more strategic
and diversified roles within the organisation is far convenient than recruiting someone from
outside, who will have no idea about the organisation’s core values and principles.
Better and efficient individual performance
Employees of an organisation are fully aware of how the business functions and clearly
understand the relationship with internal as well as external stakeholders. Furthermore,
having already undergone the necessary HR training, internal resources generate better results
than external recruits who are new to the system and need more time to understand the
nuances of the business.

Increased motivation and engagement within the organisation

Elevating internal employees to more senior roles is a strong motivator for everyone working
in the organisation and is an indicator of the trust and faith reposed by the management in its
employees. Promoting existing employees to executive positions gives out a strong message
to employees that the management values their loyalty and commitment towards the
company. It also conveys the fact that the leadership recognises the inherent talent in every
employee and is willing to nurture it with necessary training and feedback.
Talent management is not a one-time activity but a long-term strategy every HR manager has
to implement throughout various organisational levels. Once the primary business
requirements have been identified and the necessary analyses made, the next step is to
evaluate the internal people framework and map employee skills with the requirements of the
specific project or task. Thereafter, a gap analysis to identify any lack of skills will equip HR
professionals with the necessary data and information to devise and implement a structured
training and development plan. A detailed internal resource SWOT analysis will help HR
successfully answer the question of whether to hire resources from outside or build and
nurture capabilities from within the organisation.
 CHALLENGES FACED BY LEATHER INDUSTRY

Problems and Constraints for Development of the Leather Industry

Some of the major constraints to the proper development of the leather sector are:

· Poor livestock management

· Poor quality raw material supply as a result of ante-mortem and post-mortem handling of
hides and skins

· Low off-take and recovery rates

· Lack of skills, technology, intermediate inputs and processing equipment

· Stiff competition among the existing tanners

· Low utilization of industry capacity

· Lack of or poor policies for the specific development of the sector

· Poor linkages among different organizations involved with hides and skins

Due to these problems the leather industry is unable to produce high quality hides and skins
which the export market demands. Table 1 shows the decline of hides and skins exported
during the past years (Ministry of Trade and Industry).

Table 1. Quantity and value of hides and skins

Period Quantity In Tons Value

'000 USD '000
1992 4,215 32,612

1993 7,579 30,991

1994 8,002 48,065

1995 8,271 56,322

1996 6,908 56,161

1997 8,765 55,346

1998 6,642 23,241

1999 30,776
Low quality supply impact on leather Industries
Of all the specified constraints (problems) hindering development of the leather sector, the
low quality of basic raw materials is the pressing issue in need of an immediate solution.
Quality of these raw materials has implications on production costs and sales prices, which
determine producer competitiveness in the world market. Poor quality materials are
expensive to process and result in a high percentage of low grade products including rejects.
This can lead to serious losses in earnings.

Low quality supply

 Higher cost of production

 Low quality leather
 Low selling price
 Higher rejection rate, unsellable products
 No economic growth

High quality supply

 Lower cost of production processing

 High quality leather
 high selling price
 Development of the industries and growth of the national economy

According to tanners’ reports during the period of 1970 to 1980, the share of grade I to III
pickled sheep and(or) wet blue goat skins was between 60 to 70% of total skins supplied to
the world market. Between 1987/88 to 1991/92 the share of grade I to III skins dropped to 40
to 50% of total skins supplied. In 1996/97 the share dropped to 20 to 30% and in 1997/98
only 10 to 20% of skins were grade I to III. This illustrates the decline in the quality of skins
processed during this time. Reasons for the decline include the increasing prevalence of the
natural defect "Ekek" and man-made defects in the skins. The above data shows that poor
quality raw material has adverse effects on both processing and commodity value in the
world market. Thus, an immediate solution should be sought for by all concerned parties of
the leather industry.

Problems Contributing to the Downgrading of Skins and Hides

Ethiopian skins and hides, specifically sheep skin, are well known in the world to produce
high quality leather due to their fine grain and compact structure. These qualities are the
reasons why a great number of leather producing companies in the world are attracted to
Ethiopian skins and hides.

Skins, hides and leather products are the second leading export item of Ethiopia next to
coffee. As seen in Table 2, the export share of the leather industry according to 1986/87 to
1995/96 National Bank reports was between 12 and 21%. From the table it is clear that the
export share of hides and skins is declining and recent figures estimate a share of only 9 to
10%.

Table 2. The value of exports for two major commodity groups, in million Ethiopian birr

Hides and
Period Coffee % %
skins

1986/87 524.3 65.9 108.3 13.6

1987/88 439.2 56.8 133 17.2

1988/89 626.4 69.4 123.5 13.8

1989/90 405.1 55.0 134.1 18.2

1990/91 268.5 45.5 92.2 17.0

1991/92 168.5 60.3 58.6 21.0

1992/93 537 67.1 134.5 16.8

1993/94 718 58.0 203.6 16.4

1994/95 1,799 65.9 373.6 13.7

1995/96 1,724 67.9 309.7 12.2

Though Ethiopia has very good potential for supplying skins and hides to the world market,
the quality of skins and hides supplied to the world market has deteriorated. The main
problems contributing to downgrading of skin and hides can be generally categorized as
natural defects (scratches, disease, ecto-parasitic defect (Ekek) and man-made defects (brand
marks, ripping and flaying problems, preservation, transportation, storage and bad handling).

Table 3. Defect assessment and percent rejection of semi-processed samples from one
tannery

Defect %
Defect of ecto-parasite (Ekek/Disease) >50%

Putrefaction 20%

Flay cuts 15%

Other defects 15%

Natural defects (% of total) 50%

Man- made defects (% of total) 50%

In some regions natural defects are more prevalent whereas man-made defects prevail in
other regions.

Grade and Defect Assessment in the Southern Region (SNNPS) a Target Region of CFC

To begin a pricing by grade system, it is necessary to fully assess the existing quality grade
and defects in the selected project sites as an initial benchmark. Tables 4 and 5 illustrate the
grades and prevailing defects of hides and skins assessed in the SNNPS.
 IMPACT OF GST ON LEATHER BUSINESS

Over the years the Indian Leather Industry has undergone drastic change from being a mere
exporter of raw materials in the early 60’s and 70’s to an exporter of finished, value- added
leather products. The main reason behind this good transformation is the several policy
initiatives taken by the Government of India. Indian leather industry currently is one among
the top 8 industries for export revenue generation in India, holding 10% of the global raw
material, and 2% of the global trade. India has become biggest livestock producer in the
world with the capacity of 1.8 billion sq. Feet of leather production annually. Global footwear
of 13% production comprising of 16 billion pairs are made in India. India today produces
2065 million pairs of various categories of footwear. It exports 115 million pairs, thus having
95% of its production to meet its own domestic demand.

Market Capitalization-

Among all the industries the footwear industry in particular holds greater potential for
investments in India. Today India produces approx 700 million pairs of leather footwear
every year and accounts for an 18% share of the total Indian leather Export.

Size of the Industry-

Indian leather Industry today has capacity to produce 1776 million pairs; 112 million pairs of
Shoe Uppers. Though India is the second largest producer of footwear and leather garments
in the world, India accounts for a share of close to 3% in the global leather import trade of
US$ 137 billion.

The introduction of GST would thus be environment friendly-

Based on various computations, the revenue neutral GST rate across goods and services is
expected to be positioned somewhere in the range of 6.2 per cent and 9.4 per cent, depending
on various scenarios of sectoral exemptions. In sum, implementation of a comprehensive
GST in India is expected to lead to efficient allocation of factors of production thus leading to
gains in GDP and exports. This would translate into enhanced economic welfare and returns
to the factors of production, viz. land, labour and capital.
Structure Of the Industry

The leather industry is spread in different segments, namely, tanning & finishing, footwear &
footwear components, leather garments, leather goods including saddler & harness, etc.

With tanning and finishing capacity for processing 1192 million pieces of hides and skins per
annum spread over different parts of the country, most of which is organised along modern
lives, the capability of India to sustain a much larger industry with its raw material resource is
evident. In order to augment the domestic raw material availability, the Government of India
has allowed duty free import of hides and skins from anywhere in the world. It is an attraction
for any foreign manufacturer who intends to shift his production base from a high cost
location to low cost base.

India is one of the largest producers of saddlery and harness goods in the world. The saddlery
industry was established in the 19th century primarily to cater to the needs of military and
police. From then on initiatives were taken to develop, the industry and today there are over
150 units in the organised sector, out of which approximately 105 are 100% export oriented
units. The export of saddlery and harn’ess items have showed an annual growth rate of about
40% reaching DM 64 million during 1998-99. The major importers of Indian saddlery are
Germany, USA, UK, France, Scandinavia, Netherlands, Japan, Australia and New Zealand.

The Leather Garment Industry occupies a place of prominence in the Indian leather sector.
The product classification of leather garments comprise of jackets, long coats, waist coats,
shirts, pant/short, children garments, motorbike jackets, aprons and industrial leather
garments. Indian leather garments, which entered the world market only in the mid-eighties
with exports of Rs. 15 crores in 1997-98, account for about Rs. 1530 crore in 1997-98. The
major export destination of leather garments from India is Germany. In 1997, German
imports of leather garments aggregated DM 1786 million of which DM 304 million worth of
imports went from India. India, China and Turkey were the major suppliers of leather
garments for the German market, as they accounted for about 78% of the market share.
Among the three major exporting nations of leather garments, India maintains a similar level
of market share of about 20%, in both German and EU markets. Other markets for India
include Italy, U.K., U.S.A. France, Spain and Netherlands. Recently, successful attempt had
been made for exports to Denmark, Switzerland and Canada.
Global Scenario :

The global trade in leather and leather products has been increasing over the years from mere
US$ 4 billion in 1972 to US$ 70 billion in 1997. Although the exports of Indian leather and
leather products have grown manifold during the past decades, our country’s share in global
trade is around 3% among world imports of leather products. Whereas India’s share in world
imports of leather footwear is 1%.

Expected Impact Of GST-

Introduction of GST is expected to improve the prospects of engineering, capital goods and
power equipment (ECPE) sector by simplifying the tax structure. The complexity in this
sector is that companies are involved simultaneously in manufacturing of goods and
rendering of services However, in general, a comprehensive tax like GST which would
combine the state and central taxes in a single structure and where tax credit would be
available at each stage of production and final sale so that double taxation could be avoided.
This would bring in more cost competitiveness to the domestic players. In this sector indirect
tax range is much wider as compared to the other sectors where the product range is limited.
Hence, depending upon the products manufactured by the company and services rendered,
basket of goods provided in the EPC contract, it goes upto around 30% and any GST below
this could improve the cost competitiveness of players in this sector. The Budget proposal to
reduce the excise duty on footwear with leather uppers and having retail price of over Rs
1,000 has been welcomed by the industry, saying the move will help increase
competitiveness.”The footwear industry is particularly bullish as for shoes having MRP of
above Rs 1,000 per pair will now attract half the excise duty by halving the duty from 12 to 6
per cent,” Liberty Footwear Chief Executive Adesh Gupta had said.

The move will provide boost to the domestic leather footwear industry and help it compete
globally, he said adding, “It would also help provide a level-playing field for the organised
sector and would result in integration of unorganised sector into organised sector.”Reacting
to the announcement, Woodland, Managing Director, Harkirat Singh had said: “We were
expecting total removal of excise duty the budget has only halved it but will be beneficial to
leather manufacturers and many other brands in the footwear industry.”Echoing similar
sentiments, EY, Tax Partner, Bipin Sapra said, “The decrease in price of footwear is a
welcome move amidst the increase in cost of living of a middle class household on account of
increase in service tax and excise rates.”

The Finance Minister has also announced implementation of GST from April 2016.
Welcoming this move, Singh had said, “The announcement by the FM to introduce GST from
April 2016 will definitely rejuvenate the retail industry. This initiative would play an
important role by increasing buoyancy and reducing the cascading effect of tax. GST would
play a transformative role and bring about revolution in the economy.

Cost/ pricing economics for the finished goods: The GST regime would also make the
industry rework the entire cost economics, as regards – (i) the taxation/ duty structure for
procurement of raw materials; (ii) stage-wise levy of excise duty on production; (iii) service
charge on job work; (iv) sales tax on interstate movement; (v) value added tax in the selling
state; and (vi) input credit availment mechanism for excise duty/ VAT/ service tax etc. which
would all stand abolished to give birth to a single-structured, self-adjusting GST, attracted on
the eventuality of sale of finished goods.

This cost/ pricing economics would further stand corrected due to the taxation methods of
stock transfer vs sale, reduced need for multiple compliance authorities/ formalities, need to
refit a modified version of ERP tools, and adjustments in manpower/ supply chain
management cost.

Location of each segment of business enterprise is one priority, in my view, that merits the
attention of all unit owners, especially those having pan-India presence. They would have to
rewrite their business location economics: (a) as to the location of their procurement and
manufacturing centres, keeping in mind the GST environment, as against the historical
rationale of the source of raw-material/ skilled manpower/ demand zone etc.; (b) the location
of the mother depots for raw materials/ finished goods/ billing and so on, given the fact that
stock transfers would also attract GST with related implications on working capital
management; (c) and the location of selling units would be determined based on the
incentives offered by the States, considering that the GST benefits would flow more into the
kitty of consuming states.
LEATHER INDUSTRY SEEKS GOVERNMENT'S INTERVENTION ON
GST ISSUES

Leather industry has suggested the government to provideIGST exemption on imports of raw
materials and capital goods used in making products for exports, CLE today said.

Council for Leather Exports (CLE) said levy of IGST (integrated Goods and Services Tax) is
affecting the liquidity of exporters and blunting their competitive edge.

It also demanded reduction of GST on finished and composition leather from 12 per cent to 5
per cent as these are an essential material for the sector.

Further, the council asked for cut in GST rates on leather gloves and garments from 28 per
cent to 12 per cent, so as to attract foreign investments in this sector.

"The government may positively consider these requests, as the current situation is
threatening to take away the business of Indian leather industry to competitors like
Bangladesh, Vietnam and Indonesia," CLE said in a statement.

It said the industry is facing worldwide recession and fresh challenge in the form of
emergence of strong production centres in Eastern Europe.

"Loss of competitiveness due to GST issues will be a huge loss to the industry which
currently has an annual export turnover of USD 5.6 billion and employment of about 4.5
million, with predominant women employment," it added.

There is an urgent need for immediate government intervention to protect the interests of the
sector, it said.

"The industry is facing financial burden and significant outflow of capital on account of levy
of higher GST rates on major segments of the manufacturing chain and requirement of
upfront payment of GST and then claim refund," the council said.
 LEATHER EXPORTS

Leather is one of the most widely traded items in the world. Leather exports from India
comprise of raw-hide skins, finished leather, leather goods, leather garments, leather footwear
component, saddlery and harness. India is the second largest exporter of leather garments and
third largest exporter of saddlery and harness in the world.

In India, the leather is prepared from the raw-hide skin of different animals like buffalo, goat,
cow and sheep. Majorly, buffalo skin and goat skin are used to make leather products that are
exported to the other countries. It is recorded that from total leather exports 40 percent of
buffalo and 30 percent of goat rawhide skins are used for leather.

As per the official data, the exports of leather and leather products for April-Jun 2018 have
touched USD 1420 million. Product-wise share of different leather categories during the
same period is as depicted below:

Leather exports for April – June 2018, Product-wise share

As per Indian leather export data, the country is exporting this product from its 15 different
states. These are also the largest leather producing states in India. Tamil Nadu and Uttar
Pradesh are the largest states from where India exports leather and recorded share value of 50
percent and 40 percent respectively. It is followed by West Bengal (4 percent), Maharashtra
(3 percent) and Himachal Pradesh (1 percent).

Further, the leather export of India is done through 21 different Indian ports including air,
land and sea. Chennai air is the biggest port departing maximum leather shipments and
records around 40 percent of shipments from the total exports. Chennai air is followed by
JNPT, Mumbai. Indian leather exports from JNPT worth 25 percent of total leather exports.

There are more than 1000 leather exporting companies in India. Some of the prominent
players are Prara Leathers Private Limited, Rahman Industries Limited, Farida Prome
Tannery Private Limited, Tata International Limited, Super Tannery Limited and Blue
Diamond Leaders.

Top 20 countries with highest share in Indian leather exports during April – June 2018 are as
follows:

Exports during Share in

Apr-Jun 2018 Exports
Country (Mn) (percent)
U.S.A. 208.2 14.66
GERMANY 159.39 11.22
U.K. 142.78 10.05
ITALY 99.78 7.03
FRANCE 73.14 5.15
U.A.E. 71.59 5.04
SPAIN 65.7 4.63
HONG KONG 64.24 4.52
CHINA 43.93 3.09
NETHERLANDS 43.38 3.05
POLAND 31.64 2.23
VIETNAM 26.71 1.88
BELGIUM 20.81 1.47
SOMALIA 19.97 1.41
AUSTRALIA 19.27 1.36
DENMARK 16.46 1.16
PORTUGAL 16.52 1.16
KOREA REP. 16.18 1.14
MALAYSIA 16.26 1.14
SAUDI ARABIA 14.59 1.03
The major markets for Indian Leather and Leather Products are USA with a share of 14.66
percent, Germany 11.22 percent, UK 10.05 percent, Italy 7.03 percent, France 5.15 percent,
UAE 5.04 percent, Spain 4.63 percent, Hong Kong 4.52 percent, China 3.09 percent,
Netherlands 3.05 percent, Poland 2.23 percent and Vietnam 1.88 percent. These 12 countries
together accounts for nearly 73 percent of India’s total leather and leather products export.
European Union collectively accounts for 52 percent of India’s total export of leather and
leather products.

Mr. Mukhtarul Amin, Chairman, Council for Leather Exports, says that the industry expects
exports to grow by 10 percent growth by the end of 2018. “While the EU is the largest market
for leather goods, the focus has shifted to other markets such as the US,” he adds.

The Council for Leather Exports (CLE) is an autonomous non-profit organization in India. It
is entrusted with the export promotion activities and the plays a major role in the
development of the Leather Industry in India. More than 3500 companies in India exporting
or manufacturing leather and its products are the members of CLE.

Indian leather exports to the US have grown from 8 per cent to 15 per cent in the last couple
years. “But the potential is huge as our market share is barely 1-2 per cent,” he added.

A bright future

The Government of India had identified the leather sector as a focus sector in the Indian
Foreign Trade Policy in view of its immense potential for export growth prospects and
employment generation. Accordingly, the Government is also implementing various Special
Focus Initiatives under the Foreign Trade Policy for the growth of leather sector. With the
implementation of various industrial developmental programs as well as export promotional
activities, and industry’s inherent strengths of skilled manpower, innovative technology,
increasing industry compliance to international environmental standards, and dedicated
support of the allied industries, the Indian leather industry aims to augment the production,
thereby enhance export, and resultantly create additional employment opportunities.
The Indian Government has approved an outlay of USD 400 million for employment
generation in the leather industry. As part of the initiative, four mega clusters that will house
tanneries, leather goods and footwear manufacturing units and training centres are coming up
in Andhra Pradesh, Haryana, West Bengal and Uttar Pradesh.

The emerging strengths of the sector also lie in design development initiatives by institutions
and individuals, continuous modernization and technology up-gradation, economic size of
manufacturing units, constant human resource development programme to enhance
productivity, increasing use of quality components, shorter prototype development time,
delivery compliance and growing domestic market for footwear and leather articles.
 HOW THIS CONTRIBUTES TO GROWTH OF ECONOMY

When it comes to promoting growth of jobs and promoting skilled labour the Economic
Survey 2017 says that India needs to generate jobs by promoting the apparel, leather and
footwear sectors. It says that countries in East Asia which have been seeing a GDP growth of
between 7-10%, have done so due to exceptional exports in these two sectors.

While the government has announced important steps to incentivise the production and
exports of apparel, the Economic Survey said the government needs to incentivise the leather
products industry.

“Nearly every successful economic growth take-off in post-war history in East Asia has been
associated with rapid expansion in clothing and footwear exports in the early stages,” the
report said.

The average annual growth of apparel exports from India was over 20%, with some close to
50%; and that of leather and footwear averaged more than 25%. In its take-off phase of
growth, India has underperformed relative to the East Asian competitors.
Apart from the growth that these industries offer, the job opportunities especially for women
are significant. The apparel industry is the most labor-intensive industry, followed by the
footwear industry.

“Apparels are 80-fold more labor-intensive than autos and 240-fold more jobs than steel. The
comparable numbers for leather goods are 33 and 100, respectively,” the report added. While
an investment of Rs 3,156 crore has been put into the apparel industry, it has created the
highest number of jobs, ie 75.4 lakh jobs, out of which 25.9 lakh jobs go to women. In jobs
per lakh of investment it is 23.9.

In comparison the textile, food processing, automobile and steel industry have created much
lesser jobs with higher investment infused into them. For instance, the automobile industry
has an investment of Rs 29,647 crore the jobs it has created is just 7.6 lakh and jobs per lakh
of investment is just 0.3.

“Drawing upon the World Bank employment elasticities, we estimate that rapid export
growth could generate about half a million additional direct jobs every year. The opportunity
created for women implies that these sectors could be vehicles for social transformation.
Women in apparel factories emphasize the agency they had gained on financial decisions.
The agency also extended to husbands starting to helping with household chores. In
Bangladesh, female education, total fertility rates, and women’s labour force participation
moved positively due to the expansion of the apparel sector,” it said.

The Economic Survey also points out another reason to promote the apparel sector for
creating jobs is that China is slowly losing out in this space as due to rising wage levels.
“India has an opportunity to promote apparel, leather and footwear sectors because of rising
wage levels in China that has resulted in China stabilizing or losing market share in these
products,” the report said.

While India is well positioned to take advantage of China's deteriorating competitiveness as

wage costs in many Indian states are significantly lower, however it noted that this is not
happening, or at least not enough.
 “The space vacated by China is fast being taken over by Bangladesh and Vietnam in case of
apparels; Vietnam and Indonesia in case of leather and footwear. Indian apparel and leather
firms are relocating to Bangladesh, Vietnam, Myanmar, and even Ethiopia. The window of
opportunity is narrowing and India needs to act fast if it is to regain competitiveness and
market share in these sectors. Hence, the urgency,” it said.

It says this is due to certain challenges in the apparel and leather sectors such as logistics,
labor regulations, tax and tariff policy and disadvantages emanating from the international
trading environment compared to competitor countries.

FDI Inflows to Leather and Leather Goods

Opportunities of FDI Inflows to Leather and Leather Goods

The important aspects of the leather and leather goods industry in India that provide
substantial opportunities for FDI in this sector are -

 India is one of the largest livestock holding countries in the world

 The country supplies nearly 10% of the international leather requirement
 The yearly production value of Leather and Leather Goods is around US$ 4 billion
 The yearly export value of Leather and Leather Goods is around US$ 2 billion
 Export growth Compound Annual Growth Rate was 8.20% in the period 2000 to 2004
 Presently there is a spree in the transfer of technology and Foreign Direct Investment
inflows
 Huge potential for future growth, both national and international
Leather and Leather Goods - Production Centers
The important production centers of leather and leather goods in India where foreign
investors can invest are -

 Northern Region - Jallandhar and Delhi

 Eastern Region - Kolkata
 Southern Region - Chennai, Vaniyambadi, Ranipet, Dindigul, Trichy, Hyderabad,
Bangalore, and Ambur
 Western Region - Mumbai
 Central Region - Kanpur and Agra
 Leather and Leather Goods- Production capacity
 Hides - 65 million pieces
 Skins - 170 million pieces
 Leather Footwear - 909 million pairs
 Leather Goods - 63 million pieces
 Leather shoe uppers - 100 million pairs
 Leather Garments - 16 million pieces
 Industrial Gloves - 52 million pairs
 Saddlery - 0.10 million pieces
Leather and Leather Goods - Products exported
Leather products that have high exports provide higher opportunities for FDI. These are -

 Leather Footwear
 Footwear Components (Shoe Uppers, Soles, etc.)
 Leather Garments
 Leather Goods (Including Harness & Saddlery, Leather Gloves, etc.)
 Finished Leather
Exports of the Leather and Leather Goods - 2003-2004
 Leather Footwear - 31.65%
 Footwear Components - 7.19%
 Leather Goods - 23.20%
 Finished Leather - 22.76%
 Leather Garments - 10.72%
 Saddlery & Harness - 2.73%
FDI Inflows to Leather and Leather Goods - Yearly
 In the year 2003, the number of approvals were 212, out of which 44 were technical and 168
were financial, the amount of FDI approved was ` 5744.07 million and the percentage of
contribution towards total FDI was 0.20 %

 In the year 2004, the number of approvals were 163, out of which 33 were technical and 130
were financial, the amount of FDI approved was ` 2742.23 million and the percentage of
contribution towards total FDI was 0.15 %
 GROWTH OF LEATHER INDUSTRY IN INDIA

Export of leather and leather products, which was on the decline for the last two years, is
seeing signs of revival.

The exports grew 1.48 per cent at $4,388 million between April and December 2017 as
opposed to $4,324 million for the same period in 2016 due to a revival of demand in the EU.

Leather fair

Addressing media persons prior to the 33rd edition of Indian International Fair to be held
here from February 1 to 3, Mukhtarul Amin, Chairman, Council for Leather Exports, said the
industry expected exports to grow 3-4 per cent in the next few months and reach 10 per cent
growth by the end of this year.

“While the EU is the largest market for leather goods, the focus has shifted to other markets
such as the US,” he added.

Indian leather exports to the US have grown from 8 per cent to 15 per cent in the last couple
years. “But the potential is huge as our market share is barely 1-2 per cent,” he added.

The CLE has tied up with Footwear Distributors and Retailers of America to further increase
its market share. Russia, which is the 12th largest global importer of leather and leather
products, is another focus area.

“All these initiatives will help us reach 10 per cent growth rate next year,” Amin added. The
Centre has approved an outlay of ₹2,600 crore for employment generation in the leather
industry. As part of the initiative, four mega clusters that will house tanneries, leather goods
and footwear manufacturing units and training centres are coming up in Andhra Pradesh,
Haryana, West Bengal and Uttar Pradesh.

“These initiatives will generate employment for about three lakh people,” Amin added.
 CONCLUSION

Leather and leather products have been in demand since time immemorial. Recently, many
manufacturers and traders have hopped in the international market to reap huge profits from
the industry that is only moving forward. The mass level of globalization with the advent of
the internet has greatly transformed the conventional methods of leather exports and imports.
Today, B2B portals such as go4WorldBusiness.com allow businesses and traders to procure
and sell manufactured goods across borders with relative ease.
 REFERENCES
 https://www.mooreandgiles.com/leather/resources/history/
 https://www.ibef.org/exports/leather-industry-india.aspx
 http://www.smeventure.com/impact-gst-leather-business/
SNAP SHOTS