Leather Industry : Problems & Solutions

Context

Despite having a dominant position in the Indian economy, the leather industry is shrinking due to the deficiency of R&D.

Background

This industry is slowly shrinking, as reflected by the figure of exports in 2014-15, from $ 6.2 billion to $ 4.8 billion in 2019-20, due to lack of interest in the R&D by major leather industry companies. It shows a continuously declining graph of leather exports. The situation has worsened by the COVID-19 epidemic, with exports dropping by $ 1.5 billion.

Leather Industry in India

The Leather Industry holds a very prominent place in the Indian economy and is one of the oldest manufacturing industries in India. It provides employment to about 2.5 million people in the country and has an annual turnover of approximately USD 5,000,000.

India is one of the best destinations in the world for investing in the leather industry because it is abundant with raw materials in the form of huge population of cattle. India accounts for 21% of the world's cattle and buffalo and 11% of the world's goat and sheep population.

Apart from the easy availability of raw materials, investors are able to enjoy easy and abundant supply of skilled manpower, world-class technology, competent and favourable environmental standards, and the devoted support of allied industries.

Leather Industry in India is a mixture of both the organized and the unorganized sectors. About 75% of the leather output in India is generated by the small, cottage and artisan sectors (unorganized). Leather making dates back to pre-historic age. However, the modern method of leather production was introduced to India by the English and the French in 1857.

Traditionally, the leather industry in India produces hides and skins. However, there are also the secondary leather industries such as leather shoes, leather garments and other leather goods such as ladies bags, gloves, travel cases, wallets, belts and desktops.

Over the years the leather industry in India has undergone drastic change from being a mere exporter of raw materials in the early 60's and 70's to now becoming an exporter of finished, value-added leather products.

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

The major production centres for leather and leather products are located at Chennai, Ambur, Ranipet, Vaniyambadi, Trichi, Delhi, Dindigul, Kolkata, Kanpur, Jalandhar, Bangalore and Hyderabad.

Challenges of the Leather Industry

• Due to the religious significance of some animals, the leather industry is still underdeveloped.
• Companies are reluctant to invest in R&D, build enough scale and skill development of workers.
• Companies are not interested to provide value to the product with good branding and differentiator.
• Apart from this, effluent management, non-tariff barriers, quality specifications and cost of compliance to various standards hinder the export growth of the Indian leather industry.
• Environmental issues associated with leather tanning and other processing.

Major Initiatives to Boost the Leather Sector

• Central sector scheme ‘Indian Footwear, Leather & Accessories Development Programme’ is under implementation for the period 2017-18 to 2019-20.
• Interest equalization rate was enhanced from 3% to 5% for Micro, Small and Medium Enterprises units from November 2, 2018 on pre-shipment and post-shipment rupee export credit.
• Additional Employment Incentive for Leather, Footwear and Accessories Sector sub-scheme.
• Promotion of Indian Brands in Leather, Footwear and Accessories Sector sub-scheme.
• Reduction in the GST rates.
• Duty Free Import of Inputs.

Other Suggestions

• Value addition by design development
• Market research on fashion elements
• Following the innovation traction as given by companies like Hidesign, Farida Group, KH, Mirza and SuperHouse that explains their growth.
• Indian companies should follow the Delivery Duty Paid (DDP) Model under which research is done on American and European design houses and current fashion, sourcing products from Indian factories, and then delivering at the customer’s door as per the demand.

Conclusion

The leather industry in India at the present time has a huge scope, immense base for leather products and easy availability of resources and its skilled workers, making it the best destination for investment to boost the work in R&D.
The global leather industry is in the process of shifting its manufacturing base from developed to developing nations. This provides an opportunity for increased flow of foreign direct investment (FDI) into India.

Connecting the dots

Question for Prelims

Which one of the following is not a centre of Leather Industry?

(a) Calcutta
(b) Agra
(c) Kanpur
(d) Jammu

Question for Mains

Discuss the challenges faced by the leather industry in India and suggest measures to address these challenges.