Passage to India

With an annual turnover of more than $11 billion, the export of leather and leather products increased manifold over the past decades and touched $5.91 billion during 2013-14 in India, recording a cumulative annual growth rate over five years of 14%. The leather industry is bestowed with an affluence of raw materials as India is endowed with 21% of world cattle and buffalo numbers, and 11% of the world's goat and sheep population. India is also the world's second-largest producer of footwear and leather garments.

The Indian leather industry is expected to reach a turnover of $27.0 billion in the next five years, up from the present $12.0 billion. Currently, exports constitute $5.9 billion of the total leather industry turnover and major export markets continued to be Germany, with a share of about 12%, and the UK and US with 11% each.

India's export of leather and leather products

India's leather industry has witnessed robust growth, transforming from a mere raw material supplier to a value-added product exporter. Now, nearly 50% of India's leather business comes from international trade. The export of leather and leather products for April-November 2014 reached $4.5 billion, an increase from $4.0 billion during the corresponding period of last year.

In 2013-14, India's leather exports recorded a growth rate of almost 18%, reaching $5.9 billion against the performance of $5.0 billion in the corresponding period last year. Leather exports are likely to grow 20% to $6.0 billion by the end of the current fiscal year, and may reach $14.0 billion by the end of the '12th Five Year Plan'.

Government policies supporting the leather industry

The Government of India (GoI) has made several policies to support the growth of the domestic leather industry. Some of the policy initiatives that the GoI has taken to improve the prospects and to facilitate speedy expansion of the leather industry are:

• the leather industry has been delicensed and dereserved
• 100% foreign direct investment (FDIs) and joint ventures (JVs) are permitted through the automatic route
• 100% repatriation of profit and dividends if investments are made in convertible foreign currency - only declaration to this effect is required to be made to the Reserve Bank of India
• funding support for modernising manufacturing facilities and establishing design studios
• duty-free import of raw materials (namely raw skins, hides, semi-finished leather and finished leather), and of embellishments and parts under specific schemes
• concessional duty on the import of specified machinery for use in the leather sector.

Challenges for the India leather industry

• Environmental issues: the leather industry is considered to be a major pollutant, especially during the latter stages of production in tanning. As the leather industry also releases its waste and chemicals into water bodies, it is known to badly affect groundwater. Due to this, importing countries have set global standards, besides banning the use of many chemicals.
• Unavailability of raw materials: the unavailability of raw materials is a serious problem for developed and developing countries. Other components like fittings, adhesives and more are also less accessible in the preferred scale.
• Lack of technology: in India, leather is produced in the old-fashioned way, through tanning that takes a lot of time to process raw hide skin into leather. Further, the activities of designing, cutting and stitching are done manually, which affects the quality and unit-value realisation of products. Evidently, the industry lacks in terms of the level of modernisation and technology readiness.
• Inadequate investments: the leather industry needs to make high-capital investments for proper production processes and infrastructure.
• Chinese competition: China dominates the global leather industry due to its low production costs.
• Underutilisation of capacity: due to deficient raw materials, shortage of finance, labour problems and regular power failures, there is underuse of capacity in the industry.