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Leather Industry - An Overview

The Leather industry occupies a place of prominence in the Indian economy in view of its massive potential for employment, growth and exports. There has been an increasing emphasis on its planned development, aimed at optimum utilisation of available raw materials for maximising the returns, particularly from exports. The exports of leather and leather products gained momentum during the past two decades. There has been a phenomenal growth in exports from Rs.320 million in the year 1965-66 to Rs. 69558 million in 1998- 99. Indian leather industry today has attained well merited recognition in international markets besides occupying a pride of place among the top seven foreign exchange earners of the country.

The leather industry has undergone a dramatic transformation from a mere exporter of raw materials in the sixties to that of value added finished products in the nineties. Policy initiatives taken by the Government of India since 1973 have been instrumental to such a transformation. In the wake of globalisation of Indian economy supported with liberalised economic and trade policies since 1991, the industry is poised for further growth to achieve greater share in the global trade. Apart from a significant foreign exchange earner, leather industry has tremendous potential for employment generation. Direct and indirect employment of the industry is around 2 million. The skilled and semi-skilled workers constitute nearly 50% of the total work force. For the estimated employment in different sectors of leather industry click here

Salient Feature of Leather Sector in India

• Employs 1.5 million persons directly.
• A large part (nearly 60-65%) of the production is in the small/cottage sector.
• A small capital investment can generate high turnover of two/three times of the investment.
• Export oriented - amongst top Seven foreign exchange earners for India.
• India has 10% of the worlds raw material but only 4% of the world trade.
• In footwear, which constitutes over 40% of world leather trade, India has less than 1% share of world trade.
• Has good potential for future growth.
• Very high value addition within the country.

Manpower
In the leather sector, there exists a number of well equipped training institutions working in close collaboration with reputed foreign institutions, for imparting training in various facets of manufacture of leather and leather products. This apart, Indian traditional skills in embroidery, handcrafting, etc. are areas of strength.

Strengths
There exists a large raw material base. This is on account of population of 194 million cattle, 70 million buffaloes, 95 million goat. According to the latest census, India ranks first among the major livestock holding countries in the world. In respect of sheep with 48 million sheeps, it claims the sixth position. These four species provide the basic raw material for the leather industry.

The annual availability of 166 million pieces of hides and skins is the main strength of the industry. This is expected to go up to 218 million pieces by end of year 2000. Some of the goat/calf/sheep skins available in India are regarded as specialty products commanding a good market. Abundance of traditional skills in training, finishing and manufacturing downstream products and relatively low wage rates are the two other factors of comparative advantage for India.

Tanning and Finishing Capacity
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 organized 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.

Structure of the Industry
The leather industry is spread in different segments, namely, Tanning & Finishing, Footwear & Footwear Coinponents, Leather Garments, Leather Goods including Saddlery & Harness, etc. For the estimated production capacity in different segments click here

The major production centres for leather and leather products are located at Chennai, Ambur, Ranipet, Vaniyambadi, Trichi, Dindigul in Tamil Nadu, Calcutta in West Bengal, Kanpur in Uttar Pradesh, Jallandhar in Punjab, Bangalore in Karnataka, Delhi and Hyderabad in Andhra Pradesh .

The leather industry is concentrated in small and medium sector. Some mechanised tanning and footwear units operate in large scale, which are mainly for export market.

Domestic Market

The domestic market for leather products in India is steadily growing. Though presently the market for leather footwear and leather products is extremely price Sensitive. A revolution in footwear consumption pattern within the country is likely. The per capita consumption of footwear in the country is 0.5 pair. With the increase in middle class population, the consumption is likely to increase, the signs of which are clear during the last five years.

Export Potential

The leather industry, one of the major foreign exchange earners of the country recorded significant growth since the beginning of the decade. Today the share of the value added finished products in the total exports from leather sector are 80% as against 20% in 1970s.

View tables
Exports - products: Value
Exports - products: Quantity
Importing countries - percentage share

Imports by India
India is also a leading importer of finished leather, footwear components, leather machinery, chemicals. During the year 1998-99, India's total imports of these items were valued at US$160 million.

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 two decades, our country's share in global trade is around 3%.
• Among world imports of Leather products, Leather Footwear alone constitute 40% share. Whereas India's share in world imports of leather footwear is 1%. Major exporting countries of leather footwear are China (14% share), Portugal (6% share), Brazil 5% share) and Indonesia (4% share).
• India's share in world imports of Leather Garments is 6%. Major exporting countries of leather garments are China (36% share), Germany (9% share), Italy (7% share), Turkey (5% share) and Pakistan (4% share)
• India's share in world imports of leather goods is 7% . Major exporting countries are China (22% share), Italy (22% share), France 7% share) and Greece (5% share).
• India's share in world imports of Harness and Saddlery is 8%. Major exporting countries of Harness & Saddlery are Germany (14% share), U.K. (14% share), China (12% share).
• Overall, India is facing fierce competition in international market from countries like China, Vietnam, Thailand, Indonesia, etc., which are emerging as major manufacturing countries.
• East European countries like Poland, Romania, Czech and Slovak Republics have re-emerged as major production centres particularly for footwear sector. These countries pose major challenge to Indian exporters as they enjoy geographical advantage.