India is on a roll. The nation of 1.1 billion is finally being taken seriously by the big players on the world economic stage, namely the United States and China. With a young population, a solid private sector and a stable democratic government, India is in the spotlight and it’s predicted that with this momentum of growth in 2040 it will be the third largest economy. Decisively, there were many problems to address, but economic growth in India has been so impressive since major reforms took hold in the early 1990s that it’s unlikely that this South Asian tiger’s roar will easily be silenced, or even lowered.
Performance of industries in general and select industries like salt, cement, leather, tyre and rubber, paper and pulp were being considered to be growing tremendously with various initiatives taken by Government of India and increased investment in these sectors by private players, will surely deliver bottom line results in coming years.
As per a report published by Department of Industrial Policy and Promotion about various industries, the leather industry has been growing briskly.
Indian Leather Industry: Employment and Growth
The post liberalization era has opened up surfeit opportunities for the Indian leather industry. With global players looking for new sourcing options which in addition to China; India stands to gain a bigger share of the global market. Leading brands from the US and Europe is either importing or planning to source leather and leather products from India.
India which has around 3% share in the global trade in leather compared to China’s 20%. Realizing the growth potential of the leather industry which occupies a prominent place in the Indian economy, the Government of India has been making significant efforts to promote rapid advancement of the industry. With
generous export earnings, employment potential, growth and being the 10 largest sector among the Indian manufacturing sector it employs 2.5 million people and provides employment to weaker sections/minorities, of which about 30%.
The Leather Industry occupies a prominent place in the Indian economy, in view of its substantial export earnings, employment potential and growth. Leather and its products were amongst the top ten export earners for the country and is the 10 largest among the Indian manufacturing sector.
The Indian Leather industry is organized as tanning and finishing, Leather garments, Leather goods etc with Kanpur, Agra, Kolkata, and Chennai were among the major production clusters. India has vast natural resources of raw hides & skins due to which the export of leather products from India has undergone a structural change resulting in increased exports of various leather products.
Government Initiatives: Schemes, Policy and Investment
Considering the importance of sector the Government took various initiatives to encourage export of value added leather products. Under the rule of Licensing/ Reservations all the items of manufacture in the leather sector have been reserved from the SSI list in 2001. Central Government at their end took various policy support measures taking under consideration the Leather industry as one of the thrust sectors.
Some snippets from National Foreign Trade Policy 2004-09 were as follows:
- Enhancement of duty free entitlement from 1% to 3% for leather products and footwear
- CVD exemption on lining and interlining materials, customs
- Duty exempted on machinery & equipments for effluent treatment plants
- 5% concessional import duty extended to certain additional machinery
- support by implementing International marketing programme through MDA and MAIS
- By forming various inter ministerial committees.
During the 10 Five Year Plan 400 crores was made available for implementation of various schemes under “Indian Leather Development Programme” which comprises of two programmes one was Integrated Development of Leather Sector and second was Infrastructure Strengthening of Leather Sector. Some schemes like support to Rural Artisans, INTECHMART and saddler development were under implementation as continues schemes, from the 9 Five Year Plan.
Government/ Industry: Views and Proposals
There were certain proposals for 11 Five Year Plan like Stratagem to achieve US Dollar 7billion export takings by the end of XI five year plan; to increase the equip of raw hides & skins so as to reduce imports of raw hides & skins; resourcefully address environmental concerns to make the leather units meet severe environmental norms; establishing training facilities to cater to the demands of the industry which was facing an acute shortage of skilled manpower.
From policy changes to new proposals there were still certain bottle necks which were actually hindering the growth process of leather industry. Some of them in the form of SWOT analysis were as follows:
Strength, Weakness, Opportunity and Threats
Indian Leather industry Strengths depended on the factors like High growth; cheap manpower; Hefty raw material base; Continuous emphasis on product development and Design up gradation. With plethora of opportunities like rising potential in the domestic market; Use of information technology and decision support software to help eliminate the length of the production cycle for different products; Use of e-commerce in direct marketing etc.
However with such a good credentials still there were certain weaknesses like Lack of warehousing support from the government; International price fluctuation; Lack of strong presence in the global fashion market; Unawareness of international standards by many companies which has also transformed these into threats like major part of the industry is unorganized; Limited scope for mobilizing funds through private placements and public issues like many businesses were family-owned; Difficulty in obtaining bank loans resulting in high cost of private borrowing; Stricter international standards; Lack of communication facilities and skills.
What Government must do?
People engaged in this sector must have been thankful to government for the various positive policy initiatives, however, its high time to urge the government to look into the deeper problems which were still blocking the potential & expected growth of the sector, as mentioned above in the analysis, holding the sector backward.
The views are personal and have been written after study of various reports and publications.