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Positive Outlook for footwear and leather industry: Highlights CII Study

The National Manufacturing Competitiveness Council (NMCC) has identified the sector as one of the twelve focus manufacturing sectors in terms of competitiveness and untapped potential in the country.

The sector is one of the top eight foreign exchange earners of the country worth Rs. 10,000 crores per annum and accounting for 2.5 percent of the global leather-related trade of Rs. 387,200 crores. An estimated 15 percent of total purchase of leading global brands in footwear, garments, leather goods & accessories, in Europe, and 10 percent of global supply is outsourced from India.

Deliberating upon the current scenario, the Report states that the leather industry employs about 2.5 million people and has annual turn over of Rs. 25,000 crores. Nearly 60-65 percent of the production is done by small / cottage sector.

In tune with the whole sector, the Indian footwear industry too obtains 90 percent production in SMEs, having about 42,000 units registered under SSI, concentrated largely in Agra, Kanpur and Tamil Nadu. Most of the SSI units are also into the production of non-leather footwear.

The footwear segment is the pride of India's leather industry, and ranks second in the world, next to China. The global trade in leather footwear is US$ 30 billion and in non-leather footwear is US$ 18 billion; however India's share in both segments is only marginal -1.4 percent and 0.15 percent respectively.

In the last five years, the leather footwear and footwear component production increased by 60 percent, the consumption of footwear in rural India is 75 percent of the total. An interesting aspect of India's footwear industry is that India produces more of gents' footwear while the world's major production is in ladies footwear.

Analyzing the export - import potential of the sector, the Report informs that imports mostly comprise of hides and skins, semi finished and finished leather. Product imports are low.

On the other hand, almost 50 percent of the total domestic production is exported. Nearly 75 percent of the total export of footwear components is from the Southern Region, the Northern Region, being a poor second with 13 percent. Increased value of export of footwear from Rs 2957.5 crores in 2005 to Rs. 11,000 crores by 2012 is envisaged. Annual export earnings from the Footwear and Leather sector were US$ 2.1 billion in 2003-04 and the sector ranks 8th among the top 10 sectors in India's export list at 2.74 percent.

In addition to the global market, Indian Leather Industry is yet to capture the existing untapped potential in the domestic market. India has a large and growing consumer class (annual income > US$ 449), estimated to constitute nearly 90 million households by 2006 - 07, having with a CAGR around 12 percent. This is a large and growing market for Footwear and Leather goods, the Report further stressed.

The distinct advantages of the Footwear & Leather industry in India, highlighted in the Report are low costs; variety & abundance of raw material; quality consciousness and back up; R & D facilities with extension support enables India as a significant participant in the world Footwear & Leather market. As per the current scenario; the Footwear & Leather Industry in India is spread largely over unorganized sector, comprising tanning & finishing, footwear & footwear components, leather garments, leather goods including saddlery & harness, etc.

Stressing on the improvement areas in infrastructure and investment in the Sector, the Report states that an estimated investment in the entire footwear and leather sector in India is approximately Rs. 4,500 crores and annual production is at Rs. 22,000 crores.

However, India seems to have missed out the investments in the footwear industry with China getting most of the benefit by attracting 10 times more investments than India in the last 20 years.

It can be said that India has not been alive to its potential in this matter. India's loss has been China's gain. India's lack of awareness of its potential and its belated recognition of this sector have been to be made good speedily.

Though the Leather Industry, especially the Footwear industry has made a strong contribution to the Indian economy, India's share in global trade remains low, however being a labour intensive industry, its contribution to employment is significant.

In a recent study carried out by NMCC, it was highlighted that total employment in this sector would amount to 2.5 million (30 percent of which are women).

Footwear industry provides employment to the uneducated population - 40 percent of employment is represented by unskilled workers doing table work operation in the assembly line.

Large employment opportunities on the input side - minority community and low caste people have their sole source of livelihood from collecting carcasses, skinning dead animals and tanning leather.

The Footwear industry has potential to provide employment across all sections of the economy Industry estimates of employment potential 3 lakh jobs in next 3 years.

The potential for employment is across all skills to the tune of semi-skilled and unskilled labourers - 92 percent; technical supervisory, shop floor - 7 percent; entrepreneurs, senior managers and technologists - 1 percent.

Indian Footwear and Leather industry is clearly optimistic about the future. To protract this optimism, State Governments must ensure that they are able to create an attractive and enabling environment. CII believes this can be achieved through openness to investments, good governance and robust infrastructure.

Courtesy: Confederation of Indian Industry

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