Export and Import of Leather Goods

CONTENT
Chapter Executive Summary Chapter I Introduction 1.1. 1.2 1.3 Chapter II Background
Chapter Scheme Limitations & Constraints Particulars Page No. I-V 1 1 2 2 3 3 3 3-5
5-7 7 7-8 8-10 10-11 11 11-12 12-14
Leather and Leather Products Sector - An Overview 2.1 2.2 2.2.1 2.2.2 2.3 2.4 2.5
2.5.1 2.6 2.6.1 2.6.2 Introduction Structure of Leather Industry The Product
Segments Production structure of Leather Industry Wages Salaries in Leather Sector
Competitive Benchmarking Measures for Anti Dumping by Companies in India Chinese
footwear remains controversial in EU The Regulatory Regime Competitiveness
Enhancing Initiatives Trade Facilitating Initiatives
I
Chapter III
Productivity Of Leather & Leather Products Sector 3.1 3.2 3.3 3.4 3.5 3.6
Introduction The Key Features of the Registered Factory Sector Data and Variables
Growth Rate Analysis of Leather Industry Labour Productivity Growth Partial and
Total Factor Productivity Analysis of Leather Industry
15 15 15-16 16 16-17 17-18 19-21
Chapter IV
Export Trends In Leather And Leather Products 4.1. 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9
Introduction Export of Finished Leather Export of Leather Footwear Export of
Leather Goods Export of Leather Garments Export of Leather Footwear Components
Export of Saddlery and Harness Major Leather Products Exporting Countries in the
World World Leather Exports Growth
22 22-24 24-25 25-26 26-27 27-28 28-29 30 31 31-32 33 33 34 35-36 37-38
Chapter V
Globalization And Prospects For Leather Industry 5.1 5.2 5.3 5.4 Introduction
Competitive Strengths of Indian Leather Industry Indian Leather Industry:
Constraints SWOT Analysis
II
Chapter VI
Field Survey Findings 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13
Profile of Leather Manufacturing Units Turnover and profitability of the Units
Profitability of the Manufacturing Units FDI and ICT Usage Employment Profile Trade
Related Information Cost Competitiveness Price Factors Factors affecting
Productivity Factors responsible for Competitiveness of the Units Research and
development expenditure and Product innovation Factors affecting competitiveness of
the Units Measures taken for boosting domestic & export competitiveness during last
five years
39 39-40 40-41 42-43 44-45 45-46 46-50 50-51 51-52 52 53 53-54 54-55 55
Chapter VII
Recommendations References
56-59 60-61
ANNEXURE
Annexure – 1 (Survey Questionnaire) Annexure - 2 (List of Units Contacted for the

Study) Annexure – 3 (Methodology Adopted for Partial and Total Factor Productivity
Estimations)
62-71 72-74 75-77
III
LIST OF TABLES
Table No. 3.1 3.2 3.3 3.4 3.5 3.6 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Particulars
Characteristics of Registered Leather Industry in India (Value in Rs. Lakhs, others
in Numbers) Growth of Organized Leather Industry Labour Productivity Growth in
Indian Leather Industry: Segmentwise Analysis Productivity Estimates for Labour and
Capital inputs Labour, Capital and Total Factor Productivity Growth (%) Index of
Labour, Capital and Total Factor Productivity Growth Rates Composition of India’s
Leather Exports: 1991-92 to 2007-08 Direction of India’s Leather Exports: 1991-92
to 2007-08 India’s exports of finished leather: Destination wise (US$ Million)
India’s exports of leather footwear: Destination wise (US $ Million) India’s
Exports of Leather Goods: Destination wise (US $ Million) India’s exports of
leather garments: Destination wise (US$ Million) India’s Exports of Leather
Footwear Components: Destination Wise (US $ Million) India’s Exports of Saddlery
and Harness: Destination Wise (US$ Million) Page No 16 17 18 19 20 21 22 24 25 26
27 28 29
4.8
30
IV
4.9 4.10 6.1 6.2 6.3.a 6.3.b 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 6.12 6.13 6.14 6.15
Export Share of Major Leather Producing Countries in the World Growth in World
Trade of Leather and Leather Products Distribution of Leather & Leather Products
Manufacturing Units NPC Field Survey Average Annual Turnover of the 62 Leather
Manufacturing Units State wise (Rs. Lakhs) Average Profitability of the Units
during 1991-2000 (Number of Responding Manufacturing Units) Average Profitability
of the Units after 2000 (Number of Responding Manufacturing Units) Extent of
increase in Profitability after 2000 Extent of decrease in Profitability after 2000
Extent of ICT usage in the Unit Average Employment per Unit Range of increase in
employment Units engaged in exports (Number of Manufacturing firms) Percentage of
exports to total sales Growth in export during the last five years Range of
increase in exports during last five years Import by leather manufacturing units
Level of import of raw materials for units’ Production requirement Level of import
of finished product
31 32 39 41 42 42 42 43 44 45 46 46 47 47 48 48 49 49
V
6.16 6.17 6.18 6.19 6.20 6.21 6.22 6.23
Domestic market share of the manufacturing unit Share of domestic sales to total
sales Cost competitiveness of the firm during the last five years due to labor
productivity Cost Competitiveness of firms due to Total Factor Productivity Ratio
of various Cost Components in Total Cost of Production– Respondent (%) Labour
productivity during last five years Research and Development Expenditure by
Manufacturing firms R&D and Product Innovation
49 50 50 51 51 52 53 54
VI
EXECUTIVE SUMMARY
Leather and Leather Products sector is one of the important sectors among the
various constituents of the manufacturing sector in India, mainly due to its
contribution towards employment. It is one of the unique sectors which have the
advantage of the both value addition and export potential. It also contributes
significantly to total manufacturing output and exports from the country.
Leather industry has massive potential for employment, output growth and export.
The sector is one of the top eight foreign exchange earners worth over Rs. 10000
crores per annum and accounts for 3% of the global leather-related trade of Rs.
387200 crores. An estimated 15% 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. Leather industry has undergone dramatic
transformation in the recent years from a mere exporter of raw materials in the
sixties to that of value added finished products in the nineties. The Indian
leather industry comprises of both organized and unorganized and organized sectors.
The organised manufacturing sector broadly consists of tanning and dressing of
leather manufacture of luggage, handbags saddlery, harness and footwear. Currently
unorganized sector plays a dominant role in the entire production. The small scale,
cottage and artisan sectors account for over 75 per cent of the total production
and majority of them belong to unorganized sector. Though footwear is produced by
both large and small scale sector, the small scale sector has almost 90 per cent
share in the total production of footwear in India.
India’s leather and leather products exports have been growing at 6.80% per annum
during 1991-92 to 2007-08. Major export destinations are Germany, USA, UK, Italy
and Hong Kong. India’s exports of finished leather have been growing at the rate of
6.42% during 1993-94 to 2007-08. Hong Kong is one of the major export destinations
of finished leather products. Hong Kong cornered the largest share (42%) of India’s
finished leather export in 2007-08.
Leather Footwear: India’s exports of leather footwear have been growing at the
annual rate of 3.50% during 1991-92 to 2007-08. The leading importer of Indian
leather footwear is UK followed by Germany, USA, Italy, etc.
Leather Goods: India’s exports of leather goods have been decreasing at the rate of
2% per annum during 1991-92 to 2007-08 period. Germany’s position as the major
destination of India’s leather goods exports during the early 90’s has changed VII
drastically. UK, Spain, Netherlands, Australia, UAE and Belgium have all increased
their imports from India.
Leather Garments: Leather garments exports from India have been decreasing at the
annual rate of 2.46% during 1995-96 to 2007-08. Germany is the leading importer of
leather garments during 2007-08. The share of Belgium and Canada has increased over
the years. Leather garments exports to Germany, Italy, USA, France, UK and
Netherlands declined over the years. Leather Footwear Components: India’s exports
of leather footwear components have been decreasing at an annual rate of 2.27%
during 1995-96 to 2007-08. India’s exports of leather footwear components have
increased to Spain, Portugal, France, Switzerland, Slovakia, Austria and Hungar,
Italy, Germany and France are the major importers of Indian Leather Footwear
components.
Saddlery and Harnesses: India’s exports of saddlery and harnesses have been
increasing at the annual rate of 8.96% in the period of 1995-96 to 2007-08.
However, the export shares of USA, Germany, France, Netherlands and Australia have
been declining.
Globalisation and Prospects for Indian Leather Sector
Currently India has a share of 2.3 per cent (i.e. US $ 2 billion) of global trade
of leather and leather products. India has a large and growing middle class of
about 250 million people with good purchasing power. Global players in the leather
business, big or small are today focusing increasingly on India's domestic market.
The livestock is the raw material for the leather industry. Cattle, buffaloes, goat
and sheep are the four live stock species which provide the basic raw materials for
the leather industry. India ranks first among major livestock holding countries in
the world. In fact, India has the capacity to fulfill 10% of the global leather
requirement. The annual availability of 218 million good quality pieces of hides
and skins is the main strength of the industry. Along with rich endowment of raw
materials, the industry has access to abundant supply of cheap labour. Over the
years through government support the industry has been able to develop its R & D
facilities considerably. Though there is much to be done in order to meet the
challenges of globalization, the industry has established a sound base for the
same. VIII
Growth Constraints
There continues to be acute shortage of good quality finished leather. As a result

the industry is dependent on import from China and other countries. Lack of
adequate product quality adversely affected exports. On the technology front, most
tanneries use outdated technology which inhibits them from producing good quality
leather in spite of access to quality raw materials such as hides and skins.
Leather industry across the globe has been subjected to stringent pollution control
norms due to growing environmental concerns. Since the industry is dominated by
small and tiny producers, the availability of finance and the cost of capital turn
out to be a major constraint. The Indian footwear component industry which is the
pride of India in terms of its contribution to total leather exports is facing
stiff competition from China in a number of shoe components cellulose insole
fabrics, coated, impregnated fabrics and interlinings, where the price of the
imported materials is between 40% and 50% lower than the indigenously produced
materials. Along with the lack of competitiveness, the size of the Indian footwear
segment appears to be too small in comparison to that of China. This is evident
from the fact that India's share of the global footwear imports is 1.5% while that
of China is 14%. The main reason for the low scale of operation in the leather
industry and in the footwear segment could be due to the lack of investments in the
sector. Over the last 20 years China has attracted more than 10 times of investment
that India has attracted. This may be of the fact that for a long time the sector
almost in its entirety was in the SSI list. Only after 2001 the leather sector was
de-reserved. Field Survey Findings
In order to find out the issues and concerns at the firm level a field survey was
carried out with structured questionnaires. Firm level details on turnover,
employment, domestic and foreign trade, product description, cost related
information, factors affecting productivity, factors responsible for
competitiveness etc. were compiled.
Majority of the responding units (58%) belong to small scale categories. Nearly 63%
responding manufacturing units opined that the quality accreditations boosted their
business.
As regards to average profitability after 2000, 76% units reported that there is an
increase of profitability. A large majority of manufacturing units reported an
increase in export in the recent years. Most of them reported that foreign direct
investment is less than 10 percent. IX
Average employment across the manufacturing units have been found increasing from
257 employees per unit during 2003-04 to 315 employees per unit during 2007-08. The
decline in employment reported during the last year indicates that the sector is
facing problems due to increasing competition. The casualization of labour
increased during the last five years.
Cost competitiveness of the manufacturing units increased during the last five
years. More than 86% units reported that price competitiveness increased during the
last five years. However, the product price was reported increasing due to the
increase in the import of raw materials during the last five years.
A large majority of manufacturing units (65%) reported an increase in labour
productivity during the last five years.
Though the availability of quality human resources increased during the last five
years, it is reported to be still short of industry need.
As far as Government interface with business/private sector is concerned, about 69%

manufacturers are not satisfied.
Major factors that adversely affected the competitiveness of leather manufacturing

in India have been identified as non conducive government policies and taxes, rupee
appreciation against dollar, increase in raw material price, poor quality of
products, increasing labour cost, infrastructure bottlenecks, intense competition
from China, very high interest rate, lack of quality work force, exports clearance
problems, higher import and excise duty, high power & water charges, old designs,
changes in the foreign buyers taste preferences, preference for branded items,
higher income tax rate on export profits, pollution norms etc.
Recommendations: # It is quite apparent that the globalization process though

threatens Indian leather sector, provides ample opportunity in the form of
potential growth. # Efforts should be made by government and other agencies to
improve product quality. through improved design, development and prototyping.
X
# Emphasis should be put on building brand loyalties for Indian leather products. #
Efforts should be made by the council of leather export to concentrate on niche
markets like Europe. Also, the industry should focus on women's fashion footwear,
where India faces competition mainly from Eastern European countries.
# Leather producing units should be given incentives to adopt adequate pollution

control measures. Government can evolve support schemes for leather manufacturing
units that implements pollution control measures.
# Emphasis should be placed on the expansion and modernization of all segments of
the leather industry including tanneries. In fact, there is need for a paradigm
shift in the adoption of technology in the leather industry in India. # Not only
the rationalization of the duty structure but also all round efforts to be made to
encourage existing producers of leather products for technological up gradation.
# Modernization will definitely require a heavy dose of investment for which

availability of capital will be a major constraint. Since, most of the players in
the leather sector are small and tiny industries, the government should take
proactive steps for easing the capital constraint. # Encouraging FDI in the leather
sector would ease capital constraint and also improve the quality of Indian leather
products. However, in order to increase FDI in the Indian leather sector it is
essential to encourage good governance and global bench mark of best practices and
provide good infrastructure for the sector. # Development of human resource is an
important requirement of Indian leather industry. In order to increase the
availability of a large pool of skilled workers and artisans, efforts should be
made to enhance training and capacity building infrastructure in the country. In
order to rejuvenate and drive the Indian leather industry on its potential growth
trajectory there has to be an appropriate detailed policy package and a road map
for the fast track growth and development of the sector. # There should be timely
and a purposeful review of the policies implemented by the government for the
leather sector from time to time.
#
# There is a need for developing a coherent statistical data base on the leather
sector with regular updating.
XI
# Reduction in excise duty for Leather and Footwear Industry should be considered.
The Central excise duty has been reduced by GoI as part of the economic stimulus
packages Announced on December 7, 2008. The central excise duty on footwear of MRP
between Rs. 250/pair to MRP Rs. 750/pair has been reduced from 8% to 4% and for
footwear of MRP exceeding Rs. 750/pair has been reduced from 14% to 10% as part of
the economic stimulus package. In the stimulus package announced on February 24,
2009, there has been reduction in the general rate of central excise duty from 10
per cent to 8 per cent. The excise duty on footwear of MRP exceeding Rs. 750/pair
has now been further reduced from 10% to 8% in the third stimulus package after
being reduced from 14% to 10% in the first fiscal stimulus package.
CHAPTER I INTRODUCTION
1.1 Background The leather and leather products sector has been identified as one
of the unique sectors which has the advantage of both value addition and export
potential. Apart from the contribution to employment, this sector contributes
significantly to total manufacturing output and exports from the country. The
methodology adopted for the present study is based on two pronged approaches. First
approach is based on a review and analysis of published data and literature related
to the sector. Second approach is to conduct an in-depth field survey of the
manufacturing units through structured questionnaires and discussions. The survey
has been carried out among middle and top level executives of leather and leather
manufacturing units spread across various leather clusters in India. Apart from the
unit level investigations, the views of leading experts such as management
specialists, technologists, economists, policy makers etc., have also been sought
on a host of issues related to the sector.
In the recent years industrial sector has exhibited impressive signs of recovery
from a low overall industrial growth rate (based on index of industrial production)
of 2.7 per cent in the year 2000-01 to 11.3 per cent during 2006-07. After peaking
in the year 2006-07, growth rate of the sector has dipped to 8% in 2007-08 as a
result of number of adverse factors such as rupee appreciation against dollar,
increase in inflation rates, rising fuel prices, infrastructure constraints,
restrictive labour laws, of late global economic recession etc.
XII
In an era of technology driven growth, very few manufacturing activities contribute
significantly to employment. The manufacturing of leather and leather product is
one such sector which contributes considerably to employment generation in the
manufacturing sector though it has a meager (1.1 per cent) weight in the Index of
Industrial Production (IIP). Moreover, this sector is among a few sectors that can
benefit from globalization due to comparative cost advantages that India enjoys.
Indian leather industry, provides employment to 2.5 million persons and has access
to cheap raw material, skilled labour, and a vibrant domestic market. Probably
these are some of the important ingredients on which Indian leather industry rely
on to face the challenges in the coming years. Global players have shown
considerable interest in Indian leather sector and leading leather brands from the
US and Europe are sourcing leather and leather products from India. Thus, Indian
leather industry has a significant potential to grow and to provide large-scale
employment opportunities.
1.2 Chapter Scheme This study report has been presented in six chapters. Chapter II
presents an overview of leather industry in India. Chapter III discuss productivity
perfofrmance of Indian leather & leather goods sector. Chapter IV analyses the
trends in exports of leather products from India. Chapter IV analyses the prospects
of Indian leather industry in the wake of globalization and provides a SWOT
analysis. Chapter V provides the feedback received from the field survey of leather
manufacturing units and other stakeholders spread across India. Chapter VI presents
recommendations emerging from the study. 1.3 Limitations & Constraints Keeping in
view of initially set scope of work that was mainly to focus the study on secondary
data sources, which has its own inherent limitations as a result of reliability in
working out the projections, in order to substantiate the secondary data field
evidences have been also included through a primary survey later on. Due to the
limited resources available in terms of finance, the field survey was undertaken
with limited scope and coverage. However, efforts have been made to minimize such
constraints by analyzing various data sources in order to arrive at broad
recommendations for the development of the sector. The recommendations have been
formulated considering its implementability.
XIII
XIV
CHAPTER II LEATHER AND LEATHER PRODUCTS SECTOR: AN OVERVIEW
2.1 Introduction Leather industry occupies a prominent place in the Indian economy
because of its massive potential for employment, output growth and export.
Currently, the industry employs about 2.5 million persons of which 30% are women.
Nearly, 50 per cent of the total domestic production is exported. The sector is one
of the top eight foreign exchange earners of the country and accounts for 2.5% of
the global leather-related trade worth Rs. 387200 crores. In India, leather exports
are growing at an annual rate of 5-6 per cent per annum (CII, 2006). The Indian
leather industry includes both formal as well as informal sectors from small
artisans to global players and produces a wide range of products from raw hides to
fashionable shoes. Specialized institutions like Council for Leather Exports (CLE)
and Central Leather Research Institute (CLRI) have been set up to promote the
overall performance of the leather sector. The leather industry has undergone
dramatic transformation from a mere exporter of raw materials in the sixties to
exporter of value added finished products in the nineties. The share of value added
finished items in the total exports from the leather sector have reached 80 percent
now against 20 percent in the 1970s. The Policy initiatives taken by the Government
since 1973 for the development of the sector through optimal utilization of
available raw materials have been instrumental in the phenomenal transformation of
the leather industry. One important policy initiative taken by the government
includes liberalization of the leather sector. Government has de-reserved the
manufacture of various types of leather viz. semifinished leather, harness leather,
leather shoes etc., which are produced by small-scale sector. Moreover, government
is setting up exclusive shoe component parks for meeting the demands of the global
sourcing majors. It is expected that Indian foot wear industry will grow leaps and
bounds at a rate of 10% to 15% in the future years. To tap the huge domestic
footwear market, branded players are establishing footwear supermarkets in India.
2.2 Structure of Leather Industry
Important aspects of the industrial structure can be categorized into product

segments and structural components. In the following sections we analyze these two
aspects separately.
2.2.1 The Product Segments XV
The Indian leather industry comprising of both organized and unorganized sector,
produces wide range of leather products. The organized sector of leather products
broadly consists of tanning and dressing of leather (NIC Code- 1911), manufacturing
luggage, handbags saddlery, harness (NIC Code-1912) and footwear (NIC Code-1920).
However, the unorganized sector along with the above broad category of leather
products produces a number of other leather items. In order to have a clear picture
of the industry we focus on four major items produced by the Indian leather
industry. These four items constitute the various product segments of the Indian
leather industry.
(a) (b) (c) (d)
Leather footwear Leather footwear components Leather garments Leather goods
(a) Leather Footwear: Among the above mentioned product segments, the footwear
segment is the pride of Indian leather industry. It ranks second in the world, next
to China. India is the world's second largest producer of footwear with estimated
production of more than 700 million pairs per annum. Footwear accounts for 18
percent share of total exports of leather products worth U.S. $300 million per
annum. Various types of shoes produced and exported by India are dress shoes,
casuals, moccasins, sports shoes, huaraches, sandals, ballerinas, and booties.
Major production centers are Chennai, Delhi, Agra, Kanpur, Mumbai, Kolkatta and
Jalandhar. Most of the Indian manufacturers of modern footwear are already
supplying to major brands in Europe and USA. In the last five years, the leather
footwear and footwear component production increased by 60%. Interestingly, despite
producing more of gents` footwear India is major producer of ladies footwear in the
world.Though, the Leather Industry, (especially the Footwear industry) has made a
strong contribution to the Indian economy, India's share in global trade remains as
low as U.S. $ 30 billion. Being a labor intensive industry, its contribution to
employment is significant which consists of a large chunk of illiterate workers.
About 40% of employment is represented by unskilled workers indulged in table work
operation in the assembly line. Minority community and lower caste people have
their sole source of livelihood from collecting carcasses, skinning dead animals
and tanning leather which also consist a large proportion of employment provided by
leather industry.
XVI
(b) Leather Footwear Components: Leather footwear component is another important
segment of the Indian leather industry. The product range in this segment includes
shoe Uppers, Sandal Uppers, Moccasin Lasted Uppers, Unit soles, Insole and Sock
Linings etc. which are mainly exported to UK, Germany, Italy, USA., France,
Portugal, Switzerland, Spain, Netherlands and Austria. The important production
centers for this segment are Agra, Ambur, Bangalore, Chennai, Delhi, Jallandhar,
Kanpur and Mumbai.
(c) Leather Garments: The Leather Garment segment occupies a significant place in
the Indian leather industry. The product classification of leather garments
comprises of jackets, long coats, waist coats, shirts, pant/short, children
garments, motorbike jackets, aprons and industrial leather garments.
Indian leather garments sector entered the world market in the mid-eighties. It
accounts for nearly $ 300 million of exports. Germany is a major export market for
leather garments. India, China and Turkey were the major suppliers of leather
garments to the German market and accounts for about 78% of the market share. Among
the three major exporting nations of leather garments, India has captured 20% of
market share in both German and EU markets. Other markets for India are Italy,
U.K., U.S.A. France, Spain and Netherlands. Denmark, Switzerland and Canada are
among latest export destinations.
(d) Leather Goods: The leather goods segment of Indian leather industry range from
designer collections to personal leather accessories, comprising of a wide range of
products. And its share is nearly 21 per cent in Indian leather industry. This
product segment includes the products like bags, handbags, hand gloves, industrial
gloves, wallets, ruck sacks, folios, brief cases, travel ware, belts, sports goods,
upholstery saddlery goods etc. The production of these items mainly takes place in
large number of units located in Chennai, Kanpur and Calcutta. Significant feature
of this is that it employees skilled labor and they are equipped with modern and
sophisticated machinery. This segment meets the requirements of bulk buyers and
consumers in Europe, USA and Australia. The major market for Indian leather goods
segment is Germany, with an off take of about 25 per cent of the leather goods
produced in India followed by USA, UK, France and Italy. This leather goods segment
has maintained an average growth rate of 11 per cent during the last five years.
XVII
2.2.2 Production structure of Leather Industry
Unorganized sector plays a dominant role in the entire production of leather and
leather products. The small scale, cottage and artisan sectors account for over 75
per cent of the total production. Though the small scale industries (SSI) are
classified as organized sector most of them are in the unorganized sector. A
contrast of product segments with the production structure of the leather industry
in India reveals that while footwear production is undertaken both in large and
small scale sectors, leather garments and other products are mainly produced in the
small-scale sector. In fact, though footwear is produced both in the large and
small scale sector, the small scale sector has almost 90 per cent share in the
total production of footwear in India. There are about 42,000 registered SSI units
in India producing leather footwear.
Location wise Indian leather industry can be divided into 5 regions namely,
southern region, northern region, eastern region, western and central region. Among
the five regions southern region is relatively wide spread and comprises states
like Tamil Nadu, Andhra Pradesh and Karnataka. Chennai, Ambur, Ranipet,
Vaniyambadi, Trichy and Dindigul are the major producing centers in the state of
Tamilnadu. Whereas, the capital cities of Hyderabad and Bangalore are the major
production centres in the state of Andhra Pradesh and Karnataka respectively. Tamil
Nadu is the leading state in India in terms of number of registered factories for
leather and footwear industry. The state of Tamil Nadu had 37% (810) of total
leather and footwear factories in India at the end of 2004-05. In the northern
region the state of Punjab and national capital territory of Delhi are the two main
producing locations. Jallandhar is the major producing centre in Punjab. In the
eastern region West Bengal is the only state which produces leather and leather
products significantly where kolkata is the major producing centre. In the western
region, Maharastra is the major producing state for leather and leather products
where Mumbai is the major producing centre. Similarly, in the central region Uttar
Pradesh is the major producer with Kanpur and Agra as the two major producing
centers. Uttar Pradesh is the second major state in India in terms of number of
registered factories with 15% of total factories in India at the end of 2004-05.
The states of Tamil Nadu and Uttar Pradesh together accounted for 52% of total
factories in 2004-05. West Bengal and Punjab are the other key states in India with
significant number of registered leather and footwear manufacturing units. The
following map provides the distribution of leather production centers across the
country.
XVIII
The nature of these production centers varies in terms of the distribution of
producing units and product segments. For example, the small scale industries
producing leather are mainly concentrated in the state of Uttar Pradesh and Tamil
Nadu. As far as the concentration of various product segments are concerned, Agra
and Ambur are the major production centers of footwear and footwear components.
Similarly, Bangalore, Chennai, Delhi, Hyderabad etc are leading producers of
leather apparels whereas Kanpur, Kolkata, Mumbai etc are the major producing
centers for of leather accessories. Thus, the different production centers cater to
different segments of leather industry. Nevertheless, there is a great deal of
overlapping in this respect also because various segments of the leather industry
are more or less interrelated due to scale benefits on account of location.
2.3 Wages Salaries in Leather Sector In the leather industry, that both female and
male workers are offered the same wage and there is no discrimination against
female workforce. The total number of shifts across firms is approximately in the
region of 26 per month. Large variations in wages paid to workers across firms are
observed. These variations are noticeable in terms of both payments made via piece
rates or monthly wages.
Since the work in this industry is very skill based and people with any prior
industry training are always preferred. Such workforce is scarce in supply.
In the case of machinery usage, it is observed that across most units, firms have
increased their machinery usage. This shows that leather manufacturing units across
the country are purchasing more machines and upgrading their technology as new
machines by and large embody better and improved technology of production.
Mixed response is found to adoption of modern technology in the recent past. It is

asserted that this is due to the fact that large firms have the financial
capability to undertake investment in modern machineries and hence consider
technological up gradation as a natural phenomenon of moving to a higher end of
value chain. On the other hand, small firms because of several constraints- skilled
manpower, expensive machinery and fluctuating market demands are unable risk
technological up gradation.
2.4 Competitive Benchmarking XIX

The competitive benchmarking of India has been done with China, Italy and Brazil to
identify the areas where India has competitive advantages and disadvantages as
compared to these countries. The exports of India have registered CAGR of 3.61%
from 2000 to 2006 as compared to 10% achieved by China. While the exports of India
has registered a higher CAGR as compared to Italy and Hong Brazil which are the
other two major exporters of leather and footwear products, the analysis of the
value of exports show that the share of India in total exports of leather and
leather products in world is very low at 3.14%. The higher CAGR of India can also
be attributed to lower exports in absolute terms in 2001 as compared to Brazil and
Italy.
The labour productivity index of India is among the lowest in the Asian Countries
at 0.94 in 2005 as per the study conducted by Asian Productivity Organisation
(APO). Mongolia and China have the highest labour productivity index at 1.65 and
1.56 in 2005. The labour productivity in India is very low as compared to China in
production of shoes, garments and leather goods. The pairs of shoes per employee
per day in India are 20 pairs as compared to China which was at 40 pairs.
Similarly, the pieces of leather goods per employee per day in India are low at 6-8
pieces as compared to China at 12-15 pieces. The labour productivity of India has
been impacted due to rigid labour laws like lack of flexibility in contract labour
laws. Units employing over 100 people currently fall under the purview of
Industrial Disputes Act. The Act stipulates that employers must obtain necessary
approvals to effect lay-offs. This proves to be a hindrance especially for small
and medium enterprises.
2.5 Measures for Anti Dumping by Companies in India As in most other countries,
protection appears to have been the dominant motivation behind the levying of anti
dumping duties in India. General Agreement on Tariffs and Trade (GATT) therefore
contains some contingent measures, which permit the signatories to withdraw their
normal obligations under specified circumstances and impose higher protection
against import of one or more goods from one or more countries. Contingent
protection measures fall under three categories -- antidumping, countervailing and
safeguard measures. Anti-dumping duties are expected to overcome only the problem
of dumping. To deal with the problem of direct and indirect Government subsidies
there is provision for countervailing duties. In both cases injury and causal link
must necessarily be proved. Safeguard measures dealing with the problem of
"increased imports" and neither dumping nor subsidies need be present. For
safeguard measures to be implemented serious injury to the domestic industry is
required to be established. Some safeguard measures are tariff increases or
quantitative restrictions; it remains a sparingly used measure, as compensation may
have to be paid to the trading partners in appropriate cases.
XX
The subject of anti dumping is very topical and highly controversial. There seems
to be some ambiguity in the definition of trade-distorting phenomenon ''dumping''.
A product is said to have been dumped in the Indian market if it is introduced into
the commerce of the country at less than the normal value of the product and it
causes/threatens material injury to an established industry of the country. The
phenomenon of dumping is per se not condemnable as it is recognized that producers
sell their goods at different prices to different market. Differences in price are
also due to demand and supply. Export prices are generally lower than domestic
prices. However, where dumping causes or threatens to cause material injury to the
domestic industry of India, the Authority (Ministry of Finance) initiates necessary
action for investigations and subsequent imposition of anti-dumping duties. Normal
Value is the comparable price at which the goods are sold, in the ordinary course
of trade. The Normal Value cannot be determined by means of domestic sales. The act
provides for the following two alternative methods. 1. Comparable representative
Export Price to an appropriate third country. 2. Cost of production in the country
of origin with reasonable addition for administrative, selling and general costs
and for profits. The 'Margin of Dumping' is generally expressed as a percentage of
the Export Price. It refers to the difference between the Normal Value of the
similar article and the Export Price. Article VI of the GATT states the measure to
prevent dumping. Most WTO member countries have adopted/amended their antidumping
legislation largely in accordance with the GATT provisions to deal with dumped
imports. Pursuant to GATT 1994 detailed guidelines have been prescribed under the
specific agreements which have also been incorporated in the national legislations
of the member countries of the WTO. Since 1-1-95 Indian Laws have been amended in
order to bring them in line with the provisions of the respective GATT agreements.
Sections 9A, 9B and 9C of the Customs Tariff Act, 1975 and the corresponding
Customs Tariff (Identification, Assessment and Collection of AntiDumping Duty on
Dumped Articles and for Determination of Injury) Rules, 1995 there under form the
legal basis for anti-dumping investigations and for the levy of anti-dumping
duties. Some have raised questions about the ambiguities in antidumping regulations
and procedures; others have questioned the economic rationale behind such laws.
Imposition of Anti Dumping Duty is based on commodity to commodity, country to
country and suppliers in exporting countries. Global Trade Protection (GTP) report
has reported that global anti-dumping activity has remained at relatively low
levels in 2005 and 2006. The reason being that commodity type prices remain
relatively high etc., a) less dumping is taking place and b) it can be difficult to
establish that domestic industries are injured. Despite the relatively low levels
of anti-dumping activity worldwide. In India, the numbers of anti-dumping cases
have increased substantially over the last five years. China continued to be the
main target of anti-dumping cases in the recent years. Interesting to note, is the
fact that there is a significant upward trend towards China as a target. The
proportion of global anti-dumping initiations against China has been significantly
increasing in recent years. The Global Trade Protection Report has found that
global trade protection activity in the first six months of 2007 was at a record
low since the creation of the WTO.
XXI
The GATT agreement as well as the Indian laws provides that the injured domestic
industry is allowed to file for relief under the anti-dumping as well as
countervailing duties. However, the same articles shall not be subjected to both
countervailing and anti-dumping duties to compensate for the same situation of
dumping or export subsidization. The investigation process involves the following
steps: 1. Screening - the document is scrutinized and if the evidence is not
adequate, then a deficiency letter is issued normally within 20 days of the receipt
of the application. 2. Initiation - Public Notice is issued initiating an
investigation to determine the existence and effect of the alleged dumping. The
Designated Authority notifies the diplomatic representative of the Government of
the exporting country before proceeding to initiate the investigation, within 45
days of the date of receipt of a properly documented application. 3. Access to
information - Non-confidential evidence is provided. 4. Preliminary Findings - in
appropriate cases, finding containing the detailed information on the main reasons
behind the determination within 150 days of initiation. 5. Provisional Duty - not
exceeding the margin of dumping, but only after the expiry of 60 days from the date
of initiation of investigation and will remain in force only for a period not
exceeding 6 months, extendable to 9 months 6. Oral Evidence - request to
opportunity to present the relevant information orally, but subsequently it must be
reproduced in writing. 7. Final Determination - within 150 days of the date of
preliminary determination. 8. Disclosure of Information - interested parties must
be informed of the essential facts which form the basis for its decision before the
final finding is made. 9. Time-limit for Investigation Process - one year from the
date of initiation of the investigation, but maybe extended for an additional six
months. 10. Termination - under specified cases. A retrospective application will
not go beyond 90 days of the date of imposition of provisional duty. An anti-
dumping duty imposed under the Act shall have the effect for 5 years from the date
of imposition, unless revoked earlier. An appeal against the order of the
Designated Authority may be filed with the Customs, Excise and Gold (Control)
Appellate Tribunal within 90 days of the date of the order. The Legislation
provides for the collection and refund of duty. Another aspect of dumping which is
not altogether trivial is the fact that, against the background of a once hungry-
for-imported-goods country, countries try to sell, and mostly succeed in selling,
to India goods which would not be saleable in their own countries mainly by virtue
of quality
XXII
and age -- time elapsed and time remaining in relation to manufacturing date. It
appears that there are no barriers in India at which these types of goods are
stopped and checked. 2.5.1 Chinese footwear remains controversial in EU In October
2008, the European Union (EU) initiated an expiry review of anti-dumping duties on
footwear with leather uppers from China. EU anti-dumping measures are normally
adopted for a 5 year period. However, due to the extremely political nature of the
footwear anti-dumping investigation, measures in this case were exceptionally
adopted for only 2 years. This reflected the fact that there was a large
involvement of retailers and importers in the investigation, significant because
the EU has a public interest test (“Community interest”) before measures can be
adopted. The expiry review is just as controversial. Fifteen of the 27 EU Member
States opposed the initiation of an expiry review, believing that the measures
should be allowed to expire after the 2 year duration. At initiation, the European
Commission is only obliged to consult the Member States and thus the investigation
was initiated. However, if the Commission determines that the measures should
continue, 15 Member States would be sufficient to block the continuation.
Ultimately, Member States must adopt the measures proposed by the Commission and a
simple majority (14) is sufficient to force the expiry of the measures. The duty
remains in place during the expiry review. The Commission stated in a press release
that it would work to complete the review as expeditiously as possible, if possible
in shorter than the usual timeframe of 12-15 months.
2.6 The Regulatory Regime
The continuous support of the Government has resulted in massive transformation of

the Indian leather and leather products sector. As maintained earlier, the industry
which was a mere exporter of raw material in the sixties has now become one of the
major exporters of the value added finished products. Recognizing the opportunities
for Indian leather industry from globalization, the government over the last decade
and a half has under taken several initiatives. Those initiatives may be broadly
divided into two categories. One is competitiveness enhancing initiatives (those,
directly affect the competitiveness) and the other is the trade facilitating
initiatives (those affect the exports). Of course, the trade facilitating
initiatives also affect the overall competitiveness of the industry, but they
affect indirectly. Nevertheless, it is important to have a discussion of these
broad categories of initiatives undertaken by the government to improve the
performance of the leather industry in India.
2.6.1 Competitiveness Enhancing Initiatives
The government over the last decade and a half has undertaken various measures in
order to enhance the competitiveness of leather industry in India. Some of the
important measures are be the followings. Firstly, as a part of the liberalization
measures, most of the items of manufacture in the leather sector have been de-
licensed. And the Government has de-reserved the manufacture of various types of
leather including semi-finished leather, harness leather, leather shoes etc. from
small-scale sector.
XXIII
Secondly, National Leather Development Programme (NLDP) was implemented from April
1992 to September 1998 with the assistance from UNDP. The programme aimed at
integrated development of the leather industry through selected
institutions/agencies in the country. The programme was successful in creating
institutional facilities of international standards and capacity to meet the
requirements of trained man-power. In order to consolidate the gains of this
project and in line with sustainable human development concerns, Phase-II of the
programme, namely, SIDE-NLDP (Small Industries and Development and Employment
Programme in leather sector) was launched with UNDP assistance of US $ 7 million in
September, 1998. Thirdly, the Indian Leather Development Programme (ILDP) was
implemented as one of the Ninth Plan programmes to complement NLDP. The objectives
of the ILDP were mainly to bridge critical gaps in the infrastructure for
integrated development of the leather industry, activate national agencies towards
tackling gaps in the industry, to promote productivity, value addition, encourage
investment, trade development and building up of information base for the leather
industry. Fourthly, National Leather Technology Mission (NLTM) was launched in 1995
for integrated development of tanning sector. The programme mainly focused on areas
like augmentation of raw material requirements of the leather industry and
promotion of environmentally cleaner leather processing methods through use of
modern technology. NLTM had a total of 172 activities covering 16 states in the
country. In fact, the support for tannery modernisation was given a very high
priority under all the aforesaid programmes. Fifthly, on June 30, 2005, the Cabinet
Committee on Economic Affairs (CCEA) had decided to implement Rs 2.9 billion scheme
for the integrated development of the leather sector. Under this scheme,
modernization of existing tanneries and setting up of new units for footwear,
components and leather products were planned. This scheme is expected to result in
gains in terms of productivity, right-sizing of capacity, cost-cutting, and design-
development. Apart from the above initiatives which have direct implications for
the competitiveness of Indian leather industry, the government has undertaken
several other initiatives in the recent years which are basically trade
facilitating in nature i.e. they aim at improving the prospects of export for
Indian leather goods.
2.6.2 Trade Facilitating Initiatives
National Foreign Trade Policy (FTP) 2004-09 is perhaps one of the major initiatives
which aims at improving export prospects of Indian industries in general. However,
some of its components grossly address the trade concerns of the Indian leather
industry in particular. Apart from those subcomponents, there are various other
steps which the government has undertaken in recent years in order to improve the
export prospects of Indian leather goods. The followings could be
XXIV
considered as some of the important trade facilitating initiatives of the
government in the recent years. Firstly, FTP 2004-09 primarily focuses on
procedural simplification and trade facilitation measures. As a result several
schemes which were hitherto un-availed by the exporter have turned out to be
attractive. Secondly, the formation of Inter-State Trade Council to facilitate an
enabling coordination between the Central and State Governments in trade policy
matters is a very significant step towards increasing export of Indian industries
in general and leather industries in particular. Thirdly, the Export Promotion
Capital Goods Scheme ( EPCG) scheme has been made further attractive to the SSI
sector, as the export obligation has been brought down from 8 times of duty saved
to 6 times and procedures for availing the EPCG scheme has been simplified.
Fourthly, the Advance License scheme has also been made more attractive with the
introduction of various procedural simplification measure, more particularly, all
categories of exporters having past export performance can now avail the Advance
License for annual requirement, instead of the earlier practice of restricting the
facility to only status holders. Similarly, the special facility introduced to the
Status Holders in the erstwhile EXIM Policy 2003-04 has also now been
operationalized. The schemes would definitely incentivise the industry to aim at
aggressive growth. Fifthly, a single common form called Aayaat Niryaat Form has
been introduced which is a 50 page set of forms as against the earlier 120 page
set. Sixthly, the export obligation on production of goods reserved for the small
scale sector in the organized sector has been brought down from 75 percent to 50
percent to encourage exports while providing a reasonable safeguard to the small
scale and cottage sector. Non-SSI units can, however, take up manufacture of
finished leather from semi-finished stage without any export obligation. Seventhly,
the government has allowed the import of raw materials and machinery and components
under Open General License (OGL) at concessional rates of duty. Eighthly,
government has made efforts to encourage domestic manufacturer of components by
promoting joint ventures and by duty rationalization on inputs. Ninthly, the
product segments like tanned/dressed fur skins and chamois leather has been removed
from the list of industries requiring compulsory licensing.
XXV
Tenthly, in tune with the growing demand for footwear, the government is setting up
exclusive shoe component parks for meeting the demands of the global sourcing
majors. Finally, the Prime Minister has recently approved development of leather
sector under the Mission Mode, since various ministries like the Animal Husbandry,
Rural development, commerce and industries, Finance etc are involved in the
development of this sector. Consequent upon the approval of the Mission Mode, the
Planning Commission has constituted an Inter Ministerial Committee so that the
inter-ministerial issues could be sorted out in a single forum. With all such pro-
active policy initiatives undertaken by the government in recent years, it is
expected that the share of Indian leather industry in the global leather trade will
increase from the present 2.32% to 4.2% by 2010, thereby its exports in value terms
will enhance from the present Rs.10000 to Rs.20000 crore, and in the process the
industry will provide an additional employment to about one million people.
However, the Expectations would get translated into reality if and only if the
Indian leather industry grows significantly in the coming years. In an era of
globalization there are two important things which govern the growth. One is the
opportunity available from the globalization and the other is the competitive
potential of the industry to capitalize the opportunity. Therefore, it is pertinent
to analyse the prospects for Indian leather industries from globalization.
XXVI
CHAPTER III
PRODUCTIVITY OF LEATHER & LEATHER PRODUCTS SECTOR
3.1 Introduction
This chapter analyses productivity performance of organized registered

manufactures. The organized factory sector occupies an important position in
leather production in India.* Though its share is less in comparison to unorganized
sector, its importance cannot be under estimated. Structurally, the organized
factory sector consists of both small scale and large-scale registered enterprises.
The developments in the organized factory sector are easily visible and the
implications of government policy (both domestic and global) can be easily assessed
since the data are available on a continuous time series Considering these facts an
attempt has been made in the following sections to analyse the leather industry
(organized factory sector/ registered manufacturing) in India. 3.2 The Key Features
of the Registered Factory Sector
A brief look at the leather sector (registered manufacturing) at the all India
level suggests that the industry has not experienced any significant growth in
terms of Gross Value Added the years (Table 3.1). However, compound annual growth
rate of employment during 1980-81 to 2005-06 has shown positive trends at an annual
rate of 2.36 per cent. By 1990-91 total employment, value of output and value added
declined in absolute terms as compared to 1980-81 levels.
In the 1990s however, the industry has recovered. A comparison between the levels
of 2000-01 and 2005-06 reveals that the value added and value of output has started
showing signs of recovery (Table 3.1). The number of workers and the number of
factories have also increased considerably during this period.
Thus, the above analysis suggests that the organized leather industry in India has
started showing signs of growth in the recent years as compared to nineties. This
probably indicates that the measures adopted during economic liberalization did
help the organized segment of leather manufacturing in India.
*(Factory is one that is registered under sections 2m (i) and 2m (ii) of the
Factories Act, 1948. The sections 2m (i) and 2m (ii) refer to any premises
including the precincts thereof (a) whereon ten or more workers are working, or
were working on any day of the preceding twelve months, and in any part of which a
manufacturing process is being carried on with the aid of power, or is ordinarily
so carried on; or (b) whereon twenty or more workers are working or were working on
XXVII
any day of the preceding twelve months, and in any part of which a manufacturing
process is being carried on without the aid of power, or is ordinarily so carried
on).
XXVIII
Table 3.1: Characteristics of Registered Leather Industry in India (Value in Rs.
Lakhs, others in Numbers)
Indicators Number of Factories Number of Workers
198081 1298 97305
199091 1782 92915
200001 2378 114467
200304 2337 118154
2004-05 2293 126604
200506 2444 146704
Gross Value Added (Constant Prices 199394=100)
138897
127438
88996
92673
87899
117894
Value of Output (Constant Prices 1993-94=100)
718276
407316
637945
649808
657968
783405
Source: Computed from Annual Survey of Industries, CSO, Summary results of Factory
Sector
3.3 Data and Variables
Gross value added (net value added + depreciation) has been considered for the
estimation of productivity ratios. In order to eliminate the price effect from the
increasing value added, the gross value added figures have been deflated by using
the whole-sale Price Index (WPI). From the WPI, the price index for the leather and
leather products at 1993-94 base prices has been taken into account for deflating
the data on gross value added since it covers all categories of the products from
the sector.
3.4 Growth Rate Analysis of Leather Industry
A period wise growth analysis of the organized leather industry in India has been
presented in table 3.2
XXIX
Table 3.2: Growth of Organized Leather Industry
Period I
Period II (1990-91 to 2000-01)
Indicators
(1980-81 to 1990-91)
Period III (2000-01 to 2005-06)
Compound Annual Growth Rate (CAGR) (%) Gross Value Added (At Constant Prices) Value
of Output (At Constant Prices) No. of Factories (Nos) Workers (Nos) -0.86 -5.51
3.22 -0.46 -4.39 5.77 3.67 2.64 5.79 4.19 0.55 5.09
Note: Labour Productivity has been estimated as GVA/Number of Workers Source:

Computed from Annual Survey of Industries, CSO, Summary results of Factory Sector
Value of Output (at constant prices) has been found increasing continuously during
the liberalization period. Though eighties was a decade of better industrial
growth, the leather industry did not perform well resulting in negative growth
rates. Nevertheless, the sector has experienced a great deal of recovery in the
decade and a half of liberalization. Internal liberalisation and trade reforms have
certainly helped the leather industry to gain some market share in the world
market. However, the extent to which Indian leather industry can survive or grow or
emerge as a leader depends on its competitive potential. Since, the leather
industry, be it organized or unorganized, across the globe is basically labour
intensive, the improvement in labour productivity will primarily govern the
competitiveness of the sector.
3.5 Labour Productivity Growth
Table 3.2 has given an overall picture of labour productivity growth in the leather
industry. However, it is pertinent to have a look at the labour productivity across
various broad segments of the leather industry in India. Labour productivity growth
across different segments of leather industry has been presented in table 3.3.
XXX
Table 3.3: Labour Productivity Growth in Indian Leather Industry: Segmentwise
Analysis
Period I:
Period II: 1990-91 to 199900 4.99
Period III: 2000-01 to 200405 3.79
Industry
Tanning and Dressing of Leather Manufacture of Luggage, Handbags, and the like,
Saddlery and Harness Manufacture of Footwear Entire Leather Industry
Code
1980-81 to 1989-90 -1.39
1911
1912
11.76
4.70
0.36
1920 1911+1912+19 20
-11.20
4.33
-4.95
-9.40
4.36
-2.31
Note: Labour Productivity has been estimated as GVA/Number of workers
Sector
It may be seen from tables 3.3 that labour productivity in different segments of
the leather industry has been growing consistently since 1990-91. Of course, the
only exception has been the manufacture of Luggage, Handbags and the like, Saddlery
etc. Unlike other sectors it did not experience negative growth in labour
productivity in the eighties. And also this segment had experienced a decline in
growth rate during nineties while all other segments improved in terms of labour
productivity growth. Interestingly, this sector exhibits the highest growth in
labour productivity in the recent years. The contrasting performance of manufacture
of Luggage, Handbags and the like, Saddlery etc. among other segments the leather
industry in India could be due to the fact that this segment prominently focus on
the domestic market.
In the recent years, riding on domestic growth and opportunities of globalization,

various segments of Indian leather industry have started performing well,
particularly in terms of growth in labour productivity. However, the major concern
is that the footwear sector, the pride of Indian leather industry in the global
market trails behind other segments in terms of labour productivity growth.
Hence, in order to enhance the competitive edge of the leather industry, it is

important that labour productivity need to be improved considerably across all
segments of the industry especially for the footwear segment. A recent study on
labour intensity and employment potential of Indian manufacturing (ICRIER, 2008)
estimates employment growth in this sector. The study reports consistent decline in
XXXI
employment from around 19 percent ( 1990-95) to about 5 percent (2000-2003). In
addition, the L/K ratio is also seen declining- 1.27(1990-95), 0.89(1996-99) and
0.58 (2000-03).
3.6 Partial and Total Factor Productivity Analysis of Leather Industry
In this section we analyse partial productivities (labour and capital) and total
factor productivity growth (TFPG). The detailed methodology adopted for the
estimation of partial (labour & capital) and TFPG are given in Annexure 3. The
estimated partial productivity ratios for both labour and capital factor inputs are
given in table 3.4.
Table 3.4: Productivity Estimates for Labour and Capital inputs Capital
productivity (at Per Rupee Invested) 0.64 0.63 0.83 0.62 0.68 0.49 0.64 0.66 0.75
0.73 0.84 Labour Productivity (at Per Person Employed) 60976 64866 79710 79748
88107 64385 70170 60553 63490 58647 67797
Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-
05 2005-06
Note: Productivity has been estimated as GVA/Factor imput
Source: Estimated from ASI- Summary results of factory sector, CSO.
XXXII
From table 3.4 it may be noted that partial productivity estimations for labour and
capital productivity at the all India level have reported wide fluctuations during
1995-96 to 2005-06 period. Capital productivity was found fluctuating in the range
of Rs. 0.49 to Rs. 0.84 while labour productivity was found in the range of Rs.
58647 to Rs. 88107 during 1995-96 to 2005-06.
Table 3.5 provides year on year growth rate estimations for capital, labour and
total factor productivity growth. It may be noted that capital productivity growth
during 1995-96 to 2000-01 was quite negligible while 2000-01 to 2005-06 period
exhibited negative growth at the rate of -5% per annum. However, labour
producyivity growth reported positive growth for both periods at 2% and 1%
respectively. In the case of Total Factor Productivity Growth we find annual
average growth rate at 1% during 1995-96 to 2000-01 and 2% during 2000-01 to 2005-
06.
XXXIII
Table 3.5: Labour, Capital and Total Factor Productivity Growth (%)
Year
Capital Productivity Growth --1.93 31.82 -25.55 9.25 -27.55 30.36 2.81 14.57 -2.84
14.40
Labour Productivity Growth -6.38 22.88 0.05 10.48 -26.92 8.98 -13.70 4.85 -7.63
15.60
Total factor Productivity Growth -0.99 -9.51 14.52 -3.79 10.80 -19.71 8.21 -4.39
3.75 14.46
1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
2005-06 Average for the Period 1996-97 to 2000-01 Average for the Period 2000-01 to
2005-06
-2.79
2.57
2.60
5.23
0.34
4.93
Sector
Since the annual growth rates exhibit wide fluctuations, for getting a better
picture of the growth rate analysis it has been depicted in an index form in table
3.6. Among the three growth rates capital productivity has reported the highest
index at 145.34 by 2005-06, while labour productivity has reported 120.97 and Total
Factor Productivity has grown to 115.33. XXXIV
Year
Capital
Labour
Total factor Productivity Growth Index
Table 3.6: Index of Labour, Capital and Total Factor Productivity Growth Rates
XXXV
1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05
2005-06
100.00 98.07 129.89 104.34 113.59 86.04 116.40 119.21 133.78 130.94 145.34
100.00 106.38 129.26 129.31 139.79 112.87 121.85 108.15 113.00 105.37 120.97
100.00 100.99 91.48 106.00 102.21 113.01 93.30 101.51 97.12 100.87 115.33
Sector
Though TFP is lower as compared to Capital and Labour Productivity Growth, it may
be noted that technology plays a significant role in the growth of leather and
leather products sector in India. Therefore, it may be noted that technology
upgradation schemes are vital for making the sector more productive and competitive
in the global setting.
Index of Labour, Capital and Total Factor Productivity Growth Rates
XXXVI
XXXVII
CHAPTER IV EXPORT TRENDS IN LEATHER AND LEATHER PRODUCTS
4.1 Introduction
The importance of exports in the growth of an industry cannot be underestimated in

the era of globalization. The exports of leather and leather products to the rest
of the world have registered a steady increase over the years as it increased from
1279.19 million US $ in 1991-92 to 3433.30 million US $ by 2007-08 (Table 4.1).
The global trade in leather and footwear is expected to further increase after the
abolition of quota regime in January, 2005. The relative shares of the components
have changed over the years. The share of leather footwear has declined over the
years from 36.56% to 33.92% and even the share of saddlery and harness has
registered a small increase over the years from 1.20% in 1995-96 to 3.08% in 2007-
08. The shares of leather garments and leather footwear components have registered
a steep decline over the years and the share of finished leather and leather goods
has declined marginally in the past few years but ultimately increased in 2007-08
as compared to 1995-96.
Table 4.1: Composition of India’s Leather Exports: 1991-92 to 2007-08

US $ Million
Product Categories
Leather footwear S hare % Leather goods Share % Finished leather Share %
1991-92 467.26
1995-96 2000-01 2003-04 2005-06 2006-07 2007-08 340.92 19.42 363.14 20.69 371.85
21.18 381.99 19.61 441.09 22.65 382.11 19.61 553.42 25.56 539.58 24.92 556.09 25.69
786.65 29.96 649.04 24.72 605.97 23.08 950.90 1164.39 31.89 690.66 23.16 688.35
23.09 33.92 785.33 22.87 767.31 22.35
36.56
810.93 63.44 ---
XXXVIII
Leather garments Share % Leather footwear components Share % Saddlery and Harness
Share % Total leather products
----
414.21 23.60 243.33
461.21 23.68 238.48
301.29 13.91 161.38
328.39 12.50 179.01
306.98 10.30 212.65
344.16 10.03 266.24
--
13.86
12.24
7.45
6.81
7.13
7.76 105.87 3.08
--1279.19
21.38 1.20
42.73
52.75
76.39 2.19
81.85 2.43
1754.84 1947.61 2164.51
2625.46 2981.79 3433.30
Source: Foreign Trade and Balance of Payments, CMIE (various issues), Annual Report
DIPP, Ministry of Commerce & Industry (various issues)
India’s leather and leather products exports are growing at the rate of 6.80%
during 1991-92 to 2007-08. Table 4.2 provides the direction of trade with respect
to leather and leather products from India. Germany, USA, UK, Italy and Hong Kong
are the major destinations of India’s exports of leather and leather based
products.
Though the volume of Leather export from India has been increasing during 1991-92
to 2007-08, the shares of Germany, USA and Australia have decreased whereas the
shares of UK, Italy, Hong Kong, Spain, France, Netherlands and UAE have increased
over time. Germany remains the major importer of leather and leather based products
though its share in India’s total exports is decreasing.
Impact on Exports due to Financial Turmoil: As per compilation of export data by
ouncil of Leather Exports, based on Customs Monthly Data, export of leather &
leather products for the period April-October 2008 was USD 2,177 million as
compared to USD 1,914 million in the corresponding period of last year, registering
a positive growth of 14% in USD. In Rupee terms, the total export from India
increased to Rs. 94,852 million in the period from April October, 2008 as compared
to Rs. 77,869 million in the period from April-October, 2007 growing at 22%. The
above growth in exports of leather and footwear industry in both Rupee and USD in
the first six months of FY 2008-09 shows that exports of the industry has not been
impacted by financial turmoil in period from AprilOctober, 2008. The impact of
financial turmoil on the exports of leather and footwear industry is expected to be
felt in the last two quarters of FY 2008-09. XXXIX
Table 4.2: Direction of India’s Leather Exports: 1991-92 to 2007-08
US$ Million Country 1991-92 Germany Share % UK Share % USA Share % Italy Share %
Hong Kong Share % Spain Share % France Share % Netherlands Share % UAE Share %
Australia Share % 280.92 21.92 146.01 11.42 177.54 13.88 124.38 9.73 30.55 2.39
27.88 2.18 61.7 4.82 21.81 1.70 5.99 0.46 25.04 1.95 1995-96 2000-01 400.62 22.83
197.89 11.27 295.05 16.81 221.05 12.59 59.5 3.39 50.79 2.89 88.54 5.04 38.42 2.18
12.23 0.69 40.42 2.30 200304
2005-06 2006-07 2007-08 357.20 13.24 335.61 12.44 310.40 11.51 308.61 11.44 251.42
9.32 198.60 7.36 140.73 5.22 81.94 3.04 48.48 1.80 42.80 1.59 397.94 13.58 349.24
11.92 302.79 10.33 395.03 13.48 265.09 9.04 179.62 6.13 168.18 5.74 97.68 3.33
53.62 1.83 37.82 1.29 486.91 18.77 407.64 15.71 304.30 11.72 475.60 18.33 267.99
10.33 210.42 8.107. 194.27 7.49 133.10 5.13 64.87 2.50 49.52 1.91
306.02 322.18 15.71 265.88 13.65 14.88 238.1 11
342.83 245.24 17.60 238.87 12.26 11.33 277.2 12.80
98.37 227.06 5.05 10.49
100.33 158.43 5.15 7.31
88.67 107.65 4.55 55.52 2.85 17.96 0.92 27.95 1.43 4.97 57.01 2.63 34.73 1.65 31.56
1.45
XL
Other countries Share % World Total
376.38 29.44 1278.2
350.33 19.96 1754.84
405.21 465.35 20.80 21.49
--2075.79
---
---
1947.61 2164.51
2247.01 2594.52
DIPP, Ministry of Commerce & Industry (various issues) 4.2 Export of Finished
Leather
India’s export of finished leather has been growing at the annual rate of 6.42%
from 1993-94 to 2007-08. Table 4.3 provides the direction of trade with respect to
finished leather products from India. Hong Kong is one of the major export
destinations of India’s finished leather products. Hong Kong cornered the largest
share (42.25%) of India’s finished leather exports in 2007-08. There has been a
rise in both absolute and relative shares of most of countries in exports of
India’s finished leather except USA, Germany, France and Spain have registered a
marginal fall in recent years. Also, volume of imports by Germany, France and USA
has decreased over the years.
XLI
Table 4.3: India’s exports of finished leather: Destination wise (US$ Million)
1993Country Hong Kong Share % Italy Share % China Share % Germany Share % Korea
Republic Share % Spain Share % Vietnam Share % Malaysia Share % France Share % USA
Share % Other countries 94 45.93 17.01 56.73 21.01 3.53 1.30 26.58 9.84 3 1.11
15.82 5.85 --1.25 0.46 13.67 5.06 16.96 6.28 86.52 1997-98 47.75 16.12 64.46 21.76
3.18 1.07 29.37 9.84 2.96 0.99 26.71 9.01 0.68 0.22 3.29 1.11 16.34 5.51 10.9 3.68
90.55 2000-01 90.43 23.66 85.7 22.42 8.41 2.20 20.96 5.48 15.66 4.09 29.94 7.83
2.27 0.59 3.3 0.86 13.4 3.50 12.43 3.25 99.61 2003-04 199.5 35.87 85.68 15.40 21.61
3.88 22.78 4.09 24.3 4.36 35.97 6.46 22.06 3.96 7.52 1.35 15.28 2.74 7.87 1.41
113.52 2005-06 242.91 38.18 86.19 13.55 34.86 5.48 34.56 5.43 33.51 5.27 22.53 3.62
23.03 3.62 13.51 2.12 13.09 2.06 12.24 1.92 -2006-07 2007-08 257.65 37.47 115.44
16.79 37.20 5.41 24.20 3.52 33.14 4.82 20.56 3.43 23.57 3.43 22.60 3.29 11.49 1.67
9.68 1.41 -256.21 42.25 133.53 22.02 48.25 7.95 32.73 5.39 27.64 4.55 26.62 4.38
34.53 5.69 29.00 4.78 9.74 1.66 8.22 1.36 --
XLII
Share % World Total
32.04 269.99
30.57 296.19
26.06 382.11
20.41 556.09
-516.09
-555.53
-606.47
4.3 Export of Leather Footwear
India’s export of leather footwear has been growing at the rate of 3.50% during
1991-92 to 2007-08. The leading importer of Indian leather footwear product is UK
followed by Germany, USA, Italy and France (Table 4.4). The volume of imports by
all the major countries has been increasing over time. The share of UK has been
declining since 2000-01 showing a slight increase in recent years. Still it is a
major importer of India’s leather footwear. The shares of USA has been declining in
India’s leather footwear exports while Germany’s share has increased marginally.
Italy, France, Spain, Netherlands, Belgium and UAE have increased their relative
shares in India’s exports of leather footwear. Table 4.4: India’s exports of
leather footwear: Destination wise (US $ Million)
Country UK Share % Germany Share % USA Share % Italy Share % France Share % 1991-92
54.18 11.59 80.45 17.21 81.33 17.4 40.65 8.69 13.99 2.99 1995-96 56.31 16.51 67.56
19.81 97.21 28.51 8.28 2.42 11.2 3.28 XLIII 2000-01 100.82 26.39 48.89 12.79 104.09
27.24 12.83 3.35 19.49 5.1 2003-04 124.62 22.51 110.81 20.02 80.7 14.58 58.27 10.52
37.68 6.8 2005-06 164.15 20.78 140.85 17.44 121.14 15.00 91.00 11.28 56.93 7.05
2006-07 188.04 20.52 174.47 19.04 116.40 12.70 130.75 14.27 74.28 8.11 2007-08
215.92 21.93 203.43 20.66 131.61 13.37 166.27 16.89 86.77 8.81
Spain Share % Netherlands Share % Belgium Share % UAE Share % Denmark Share % Other
countries Share % World Total
0.72 0.15 3.78 0.8 3.64 0.77 2.92 0.62 11.98 2.56
1 0.29 5.95 1.74 1.76 0.51 5.49 1.61 2.6 0.76
3.87 1.01 11.16 2.92 5.04 1.31 8.62 2.25 4.83 1.26
19.53 3.52 17.61 3.18 8.13 1.46 11.66 2.1 10.55 1.9
43.27 5.36 29.51 3.65 20.08 2.49 19.99 2.47 16.01 1.98
46.07 5.03 43.35 4.73 20.94 2.28 22.07 2.41 13.29 1.45 ---
56.22 5.71 69.34 7.04 29.30 2.98 25.73 2.61
173.62 37.15 567.19
83.56 24.51 440.87
62.35 16.32 481.93
73.86 13.34 653.35
--789.97
--916.43
--984.59
DIPP, Ministry of Commerce & Industry (various issues) 4.4 Export of Leather Goods
India’s export of leather goods have been decreasing at the rate of 1.58% during
1991-92 to 2007-08 periods. Table 4.5 provides the direction of trade with respect
to leather goods from India. Germany’s position as the major destination of India’s
leather goods exports during the early 90’s has changed drastically. It was
displaced by UK as the leading importer of India’s leather goods. The imports by
Germany, Italy and France have increased recently from 2006-07 to2007-08 but
finally have shown a decrease in absolute terms along their shares when compared
with 1991-92. USA, Spain, Netherlands, Australia, UAE and Belgium have increased
their imports from India in absolute as well as relative terms.
XLIV
Table 4.5: India’s Exports of Leather Goods: Destination wise (US $ Million)
Country USA Share % UK Share % Germany Share % Spain Share % Italy Share %
Netherlands Share % France Share % Australia Share % UAE Share % Belgium Share %
Other countries 1991-92 1995-96 96.21 11.86 91.83 11.32 199.8 24.63 27.15 3.34
83.75 10.32 18.03 2.22 47.7 5.88 17.78 2.19 3.06 0.37 6.13 0.75 219.49 78.37 21.58
33.86 9.32 117.25 32.28 8.83 2.43 13.68 3.76 14.08 3.87 14.83 4.08 15.8 4.35 3.49
0.96 5.91 1.62 57.04 2000-01 2003-04 107.89 24.45 46.14 10.46 85.95 19.48 18.26
4.13 23.72 5.37 19.88 4.50 19.36 4.38 10.96 2.48 6.46 1.46 6.97 1.58 95.5 98.87
18.32 63.59 11.78 92.38 17.12 40.03 7.41 36.61 6.78 22.32 4.13 22.19 4.11 16.99
3.14 16.68 3.09 9.24 1.71 120.68 2005-06 116.00 17.57 110.60 16.76 91.07 13.80
51.19 7.76 46.32 7.02 30.68 4.65 26.56 4.02 25.62 3.88 22.68 3.44 10.25 1.55 -2006-
07 124.30 18.01 111.25 16.12 99.12 14.34 52.18 7.56 49.72 7.20 31.43 4.55 30.75
4.46 21.28 3.08 21.02 3.04 11.51 1.67 -2007-08 121.43 19.35 131.62 20.97 121.43
19.35 59.14 9.42 56.27 8.97 36.13 5.76 34.91 5.56 27.96 4.46 25.10 4.00 13.54 2.16
XLV
Share % World Total
27.06 810.93
15.70 363.14
21.65 441.09
22.36 539.58
-660.07
-690.19 627.53
DIPP, Ministry of Commerce & Industry (various issues) 4.5 Export of Leather
Garments
India’s export of leather garments have been decreasing at a rate of 2.46% during
1995-96 to 2007-08. Table 4.6 provides the direction of trade with respect to
leather garments from India. Germany is the leading importer of leather garments in
2008-09. Germany, Italy, USA, France, UK and Netherlands have all started importing
less of Indian leather garments over the years. USA’s import from India increased
once during 2000-01 otherwise it has declined over the period. Surprisingly, Spain
and Canada has experienced drastic increase in exports from India in this sector.
Table 4.6: India’s exports of leather garments: Destination wise (US$ Million)
Country Spain Share % Germany Share % Italy Share % USA Share % France
1995-96 5.47 1.32 122.05 29.46 68.21 16.46 73.53 17.75 32.67
1998-99 19.82 5.18 114.76 30.04 60.7 15.72 47.02 12.31 28.12
2000-01 40.07 8.68 93.88 20.35 54.27 11.76 102.58 22.24 24.81
2003-04 45.36 15.05 57.67 19.14 53.49 17.75 46.86 15.55 16.8
2005-06 60.2 18.06 55.67 16.71 47.36 14.21 45.11 13.54 22.78
2006-07 42.91 13.9 53 17.17 52.3 16.64 36.72 11.89 23.34
2007-08 47.61 17.12 68.81 24.75 58.34 20.98 27.75 9.98 27.11
XLVI
Share % UK Share % Canada Share % Denmark Share % Netherlands Share % Belgium Share
% Other countries Share % World Total
7.88 41.21 9.94 2.8 0.67 9.08 2.19 13.57 3.27 2.12 0.51
7.36 38.81 10.16 3.29 0.86 9.22 2.41 16.16 4.23 2.99 0.78
5.37 54.31 11.77 8.34 1.8 15.77 3.41 14.32 3.1 2.19 0.47
5.57 23.18 7.69 5.93 1.96 4.77 1.58 7.33 2.43 4.04 1.34
6.84 21.41 6.42 10.06 3.02 10.15 3.05 8.94 2.68 6.06 1.82
7.56 22.39 7.25 8.53 2.76 11.32 3.67 10.89 3.53 5.14 1.67
9.75 23.10 8.31 8.94 3.22
11.26 4.05 5.11 1.84
43.5 10.5 414.21
41.05 10.74 381.94
50.67 10.98 461.21
35.86 11.9 301.29
--333.25
--308.78
47.61 17.12 278.03
4.6 Export of Leather Footwear Components
India’s export of leather footwear components have been decreasing at a rate of

2.27% during 1995-96 to 2007-08. (Table 4.8) Italy, Germany and France are the
major importers of Indian Leather Footwear components. Despite this decline India’s
exports of leather footwear has increased to most of the countries except U.K. and
Austria in both absolute as well as relative terms. Though shares of Spain,
Portugal and Slovakia has declined in recent years but their shares have increased
drastically from 1991-92 to 2007-08.
Table 4.7: India’s Exports of Leather Footwear Components: Destination Wise (US $
Million)
XLVII
Country Italy Share % Germany Share % UK Share % Spain Share % Portugal Share %
France Share % Switzerland Share %
1995-96 54.11 22.23 55.71 22.89 47.31 19.44 1.6 0.65 7.42 3.04 4.38 1.8 3.88 1.59
1998-99 58.06 24.08 53.05 22 57.94 24.03 4.05 1.68 11.39 4.72 9.93 4.11 6.67 2.76
2000-01 61.04 25.59 48.7 20.42 50.18 21.04 7.01 2.93 17.88 7.49 8.44 3.53 4.95 2.07
2003-04 41.44 25.67 27.66 17.13 17.2 10.65 15.65 9.69 12.9 7.99 10.96 6.79 4.42
2.73
2005-06 34.84 19.09 24.11 13.21 21.71 11.89 18.88 10.34 16.35 8.96 14.58 7.98 7.33
4.01
2006-07 44 20.7 34.17 16.08 12.5 5.88 14.91 7.02 15.07 7.09 21.17 9.96 7.99 3.76
2007-08 56.24 33.39 40.56 24.08 18.07 10.72 17.29 10.26 --26.53 15.75 8.2 4.86
Slovakia
0.05
0.17
3.89
3.83
7.13
14.93
--
Share % Austria Share %
0.02 5.2 2.13
0.07 2.09 0.86
1.63 2.86 1.99
2.37 5 3.09
3.91 5.28 2.89
7.03 3.13 1.14
-1.52 0.90
Hungary
--
--
0.05
1.82
4.57
5.09
--
Share %
--
--
0.02
1.12
2.5
2.4
--
XLVIII
Other countries Share % World Total
63.67 26.16 243.33
37.71 15.64 241.06
33.48 14.03 238.48
20.5 12.7 161.38
--182.55
--212.51
--168.41
DIPP, Ministry of Commerce & Industry (various issues) 4.7 Export of Saddlery and
Harness
India’s export of saddlery and harnesses has been increasing at a rate of 8.96% in
the period of 1995-96 to 2007-08. Table 4.8 provides the direction of trade with
respect to saddlery and harness from India. India’s volume of exports of saddlery
and harness to all the ten major importing nations has been increasing in the
period 1995-96 to 2007-08 but the shares of USA, Netherlands and Australia have
been declining in India’s saddlery and harness exports. Despite this, there is a
phenomenal increase in the growth rate of India’s exports of saddlery and harness
indicates that India is capable of diversifying and exporting to more and more
countries.
Table 4.8: India’s Exports of Saddlery and Harness: Destination Wise (US$ Million)
Country UK Share % USA Share % Germany Share % France Share % Sweden Share % 1995-
96 1.68 7.85 5.42 25.35 3.95 18.47 2.27 10.61 0.83 3.88 1998-99 2.73 8.23 6.33
19.09 8.42 25.39 2.42 7.3 1.76 5.3 2000-01 8.4 19.65 8.92 20.87 7.64 17.87 3.17
7.41 1.63 3.81 2003-04 5.93 11.24 8.92 16.9 10.88 20.62 4.74 8.99 2.27 4.3 2005-06
14.91 24.24 13.91 22.61 10.94 17.79 6.80 11.06 3.74 6.08 2006-07 12.49 19.04 14.82
22.59 13.09 19.95 7.14 10.88 4.70 7.16 2007-08 16.24 19.26 13.36 15.84 19.75 23.42
9.21 10.92 6.37 7.55
XLIX
Netherlands Share % Italy Share % Spain Share % Australia Share % Other countries
Share % World Total
1.71 7.99 0.54 2.52 0.51 2.38 1.1 5.14 3.37
2.76 8.32 0.78 2.35 0.65 1.96 1.47 4.43 5.81
1.9 4.44 1.32 3.08 1.18 2.76 2 4.68 6.56
2.91 5.51 1.73 3.27 1.91 3.62 1.97 3.73 11.48
3.68 5.98 2.80 4.55 2.53 4.11 2.20 3.58 --61.51
3.38 5.15 2.83 4.31 3.00 4.57 4.16 6.34 --65.61
5.59 6.63 4.92 5.83 3.54 4.20 5.35 6.34 16.24 19.26 84.33
15.76 21.38
17.52 33.15
15.35 42.73
21.76 52.75
4.8 Major Leather Products Exporting Countries in the World
Table 4.9 gives the major leather and leather products exporting countries and
their share in world trade. China corners the largest share among all the nations
in the export of leather and leather product. Its share has been rising steadily
from 17.77% in 2000 to 32.11% in 2006. Though Italy’s share has been steadily
declining it still remains a major exporter of leather and leather products next
only to China. Brazil’s exports have been declining steeply from 2000 to 2006.
Shares of countries like Korea Republic, Indonesia and Taiwan have been steadily
declining.
Table 4.9: Export Share of Major Leather Producing Countries in the World
L
Country
Export Share As a percentage (%) of World Export

2000 2004 17.77 15.89 3.14 2.54 21.99 15.81 3.39 2.44 1.71 2006 32.11 10.74 0.34
3.14 0.47 0.29 0.41 0.32 52.13 100.00 --
China
Italy Brazil India Romania
1.09
Korea Republic Indonesia Taiwan Rest of the world 3.19 2.49 1.97 51.92 100.00
77331.26 1.63 1.53 1.26 50.24 100.00 97606.18
World Total Total Volume (US$ Million)
Source: World Statistics, ITC, Geneva, India’s exports, DGCI & S
4.9 World Leather Exports Growth
The volume of world trade in leather and leather products has been steadily
increasing. The growth rate during the 2004-06 was 55.48% compared to 5.99% growth
in the pre 2000-04 time period (Table 4.10). This shows that there was impressive
growth in world trade of leather and leather manufactures in the post 2000 period.
Indian export’s growth rate has shown a marginal increase in the post 2004 period
and its growth rate lags behind that of China, which registers an impressive growth
rate of 11.79% in the pre 2004 period and 28.02% in the post
LI
2004 period. Romania is another country, which registers an impressive growth rate
of 18.78% and 21.63% during the time period 2000-04 and 2004-06 respectively. Italy
is another nation which has shown an impressive growth rate of 16.80% during 2004-
06 as compared to 5.86% during 2000-04. But India is better off than some nations
like Brazil and Taiwan, which have been suffering from negative growth rates for
both the post 2004 period.
Table 4.10: Growth in World Trade of Leather and Leather Products
US $ Million
CAGR % 2006 2621.00 35182.24 21056.75 2382.79 2473.06 2040.80 1876.37 1210.46
235956.92 2000-04 4.91 11.79 5.86 8.04 18.78 -10.42 -6.17 -5.29 5.99 2004-06 4.97
28.02 16.80 -15.12 21.63 13.38 12.21 -0.70 55.48
Countries
India China Italy Brazil Romania Korea Republic Indonesia Taiwan World trade
2000 1963.55 13741.54 12286.64 2427.39 839.64 2465.80 1923.01 1526.23 77331.26
2004 2379.44 21464.30 15432.76 3307.49 1671.43 1587.48 1490.06 1227.81 97606.18
CAGR= Cumulative Average Growth Rates Source: World Statistics, ITC, Geneva,
India’s exports, DGCI & S
LII
CHAPTER V
GLOBALIZATION AND PROSPECTS FOR LEATHER INDUSTRY
5.1 Introduction
The post liberalization era has opened up a plethora of opportunities for the
Indian leather industry. Along with China and Vietnam, India stands to gain a
bigger share of global market. Since global players are looking at new sourcing
options for their trade in leather products. Leading brands from the US and Europe,
are planning to source leather and leather products from India The Hindu Business
Line, February 04, 2005). Global players who participated at the India
International Leather Fair, 2005, emphasized on India as sourcing destination for
their trade in leather products. The domestic producers have also realized the
opportunities ahead. In fact, almost every player in the organized sector is on an
expansion spree, and many are doubling capacities. Currently India has a share of
nearly 2.3 per cent i.e. 2 billion in the global trade of leather and leather
products of nearly US $ 88 billion. Moreover, India has significant cost advantages
in terms of labour and raw materials in comparison to the other developed countries
which are evident from the interest shown by the global players as mentioned above.
Taking the current meager share in global trade and the cost advantages into
account it may be said that Indian leather industry has a significant potential for
higher share in global trade. 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 a Compound Annual
Growth Rate (CAGR) around 12%. Global players in the leather business, big or small
are today focusing increasingly on India's domestic market which is already,
witnessing numerous developments. Not only quantity-wise but also quality wise
there has been significant development in the Indian leather sector: The number of
people within the country who are today ready to buy high priced shoes, in the
range of US $ 30 to US $ 45 a pair, has gone up significantly. Besides, the retail
revolution is also boosting availability of goods, and the market for branded
footwear (www.tdctrade.com (2006) International Market News, May). Hence, looking
at the global trade scenario and domestic demand it may be said that the Indian
leather industry has the potential to grow leaps and bounds in the future years to
come. And hence it has an enormous potential for offering huge employment
opportunity particularly in rural and semi-urban areas. It is estimated that the
potential for employment across all skills to be
LIII
in the tune of semi-skilled and unskilled labourers - 92%; technical supervisory,
shop floor - 7%; entrepreneurs, senior managers and technologists - 1% (CII-2006).
However, the extent to which the growth potentials of Indian leather industry can
be realized depends its competitive strength vis-a –vis its competitors. Otherwise,
the absence of required competitive strength in the era of globalization will turn
a producing economy into a consuming one only.
5.2 Competitive Strengths of Indian Leather Industry
The perception about growth potential of Indian leather industry draws its
inspiration from various sources constituting the strength of the industry. Some of
the important ones could be the followings.
(a) Raw Material Source: Fortunately, the industry has access to one of the
cheapest and abundant source of raw material. The livestock is the raw material for
the leather industries. Cattle, buffaloes, goat and sheep are the four live stock
species which provide the basic source of raw materials for the leather industry.
As per the latest live stock census i.e. 17th live stocks census of India-2003.
India has 194 million cattle, 70 million buffaloes, 95 million goats and 48 million
sheep population. Also, India ranks first among major livestock holding countries
in the world. (b) In fact, India has the capacity to fulfill 10% of the global
leather requirement 1. Moreover, not only the country has access to abundant supply
of raw materials but also the available raw material is diverse in variety. The
annual availability of 218 million pieces of hides and skins is the main strength
of the industry. Quality wise, some of the goat/calf/sheep skins available in India
are regarded as specialty products commanding a good market. Thus, the rich
endowment of raw material for the production of leather puts the country on a
competitive footing. (c) Availability of Labour: Along with the rich endowment of
raw materials the industry has also access to large supply of labour. Along with
the large supply of labour, the industry has access to abundant of traditional
skills in tanning, finishing and manufacturing downstream products. Thus, the large
supply of skilled labour which has resulted in relatively low wage rate certainly
puts the industry in a cost advantageous position vis-à-vis its competitors. (d) R
& D facilities: Over the years through government support the industry has been
able to develop its R & D facilities considerably. Though there is yet much to be
Shobha Mathur, “Moving up the value chain,” Industrial Economist, February 15, 2005
LIV
done in order to meet the challenges of globalization, the industry has established
a sound base for the same. (e) Apart from the above discussion on the competitive
strengths of Indian leather industry it is essential to have a brief look at the
estimated picture of India’s export competitiveness in leather and leather
products.
5.3 Indian Leather Industry: Constraints
Despite the fact that Indian leather industry has comparative advantage owing to
factors like abundance of raw material, cheap source of labour, traditional skills,
R&D facilities etc., there is no guarantee that it can achieve its growth
potentials since it has been facing several hurdles. Some of the hurdles could be
listed as follows. Firstly, on the quality front, there continues to be acute
shortage of good quality finished leather. As a result the industry is dependent on
import from china and other countries. Lack of adequate product quality adversely
egested India exports complement appreciation of rupee. Secondly, on the technology
front, most of the existing tanneries use outdated technology which inhibits them
from producing good quality leather in spite of access to quality raw materials
such as hides and skins. The tanneries require high doses of capital investment in
order to improve the existing technology so that Quality raw material could be
produced and supplied to leather manufacturing units. Thirdly, in recent years the
leather industry across the globe has been subjected to stringent pollution control
norms due to growing environmental concerns. Adhering to pollution control norms
helps them to access better market and lower tax regimes. But unfortunately, the
pollution control measures adopted for a large segment of Indian leather sector has
been found to be in adequate which ultimately erode their competitive advantage. In
fact, in India in recent years a number of tanneries have been closed on
environmental considerations.
Since the Leather and leather products sector especially the tanneries are facing a
lot of problems in terms of Environmental norms, there is an urgent need for
modernizing the existing ones and also setting up new common effluent treatment
plants at various leather industry clusters as per international standards.
LV
The Tannery Modernization Scheme of the Government of India provides investment
grants for enabling the small and medium enterprises to readjust quickly to the
changed circumstances of WTO regime. Tanneries in China and other major competing
countries have invested significant amounts of funds in large tanneries.
Suitable measures to attract large FDIs and JVs in leather sector from potential
investors from abroad would help in meeting the additional capital requirement of
the sector.
Fourthly, from the financial point of view, since the industry has been dominated
by small and tiny producers, the availability of finance and cost of capital turns
out to be a major constraint. Fifthly, from a planning perspective, at the
government level there is no clear cut road map for the Indian leather industry to
achieve its potentials. Moreover, not only there exist lacuna at the planning and
policy level but also the sector suffers from weak statistical reporting system.
The Council for Leather Exports (CLE) markets the products abroad and maintains the
export figures and other associated functions for exports. But the domestic sales,
production and statistics of the unorganized sector producing leather and leather
products are not available adequately. This hinders in taking a holistic view of
the sector. As a result, the assessment of future potential based on forecasting
tends to be far from reality. Finally, on the global competitiveness front Indian
leather sector is much behind that of its competitors. In fact, all the aforesaid
obstacles directly or indirectly but adversely affect the productivity and
competitiveness of Indian leather industries in comparisons to its competitors such
as China, Indonesia, Thailand, Vietnam and East European countries. As a result
India has a very low share in the aggregate global trade in leather in comparison
to its major competitor i.e. China. For example, India has a less than 3% share in
the global trade in leather compared to China’s 20%. As regards to competition
emanating from these countries, immediate requirement is to make available quality
raw material to Indian leather Manufacturing Units. Apart, from that the present
level of technology adopted by Tanneries and manufacturing units need urgent
upgradation. In fact, not only the leather industry in general, but also the Indian
footwear component industry which is the pride of India in terms of its
contribution to total leather exports is also facing stiff competition from China
in a number of shoe components - cellulose insole fabrics, coated, impregnated
fabrics and interlinings, where the price of the imported materials is between 40%
and 50% lower than the indigenously produced materials. Components worth US $ 35
million were imported into the country last year, and Indian Footwear Component
Manufacturer Association (IFCOMA) expects a 100% increase in imports in the
component area from China in the current fiscal.
LVI
Along with the lack of competitiveness the size of the Indian footwear segment
appears to be too small in comparison to that of China. This is evident from the
fact that India's share of the global footwear imports is 1.5%, as against China's
share of 14%. Indian Shoe Federation, a body representing footwear export views
that "China has a very big footwear industry, and there is no way we can compete
with China. In the low cost products, orders cannot come to India, not just because
of the price, but also because we do not have factories that can undertake such
huge orders."
This is precisely because of the fact that India's footwear manufacturing, even
today is concentrated in the unorganized and small scale sector. In fact, about 85%
of footwear production in India is still in tiny, cottage and small scale sector
(Mani Almal, President – IFCOMA, http://www.ifcoma.org/about/message.asp). However,
in the footwear business if at all India has some competitive advantages in the
global scenario; it is in the mid price segments. But here also, we are facing
competition from Vietnam.
The major reason for the low scale of operation in the leather industry in general
and in the footwear segment in particular could be lack of investments in the
sector. Over the last 20 years china has attracted more than 10 times of investment
that India has attracted. This is precisely because of the fact that for a long
time the sector almost in its entirety was in the SSI list. Only recently, i.e.
since 2001 it has been freed from the SSI clutch. And in the absence of appropriate
regulatory environment it takes more than the required time for capacities to be
enhanced. Thus, the above discussion suggests that the leather industry in India is
constrained by several obstacles in its progress towards achievement of potential
growth in the future years. But, certainly, the obstacles do not imply that the
industry cannot achieve its potential growth because along with its obstacles it
has also a great deal of positive strengths as discussed earlier. Hence, the
success on the growth front will definitely depend on the relative strengths of the
positive and negative forces faced by the industry. In fact, a SWOT analysis gives
a better picture in this regard.
5.4 SWOT Analysis
An analysis of Strength, Weakness, Opportunity and Threats helps to assess the

realistic potential of an industry. Though a discussion on all these aspects of
Indian leather industry has already been done above, the following table summaries
the above discussion in the form of SWOT analysis.
LVII
SWOT Analysis of the Indian leather industry
LVIII
STRENGTHS
• • • • •
High Growth Ready availability of highly skilled and cheap manpower Large raw
material base Policy initiatives taken by the Government Capability to assimilate
new technologies and handle large projects
Continuous emphasis on product development and design upgradation
THREATS
•
OPPORTUNITIES
• •
Rising potential in the domestic market Growing fashion consciousness globally 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
WEAKNESSES
• • • • • • •
Lack of warehousing support from the government International price fluctuation

Huge labour force resulting in high labour charges Lack of technological inputs
Lack of strong presence in the global fashion market Unawareness of international
standards by many players
Major part of the industry is unorganized Limited scope for mobilizing funds
through private placements and public issues (many businesses are familyowned)
Difficulty in obtaining bank loans resulting in high cost of private borrowing
Stricter international standards High competition from East European countries and
other Asian countries Shortage of communication facilities and skills
LIX
Comparative picture of strength, weakness, opportunity and threat definitely
suggests that the realization of potential growth for Indian leather industry
though seems difficult is not impossible. The industry certainly can achieve its
potential provided efforts are made at the planning and policy level to ease its
constraints. To put it in other words, Indian leather industry can meet the
challenges of globalization if appropriate steps are taken by the state in a timely
manner.
LX
CHAPTER VI FIELD SURVEY FINDINGS
6.1 Profile of Leather Manufacturing Units National Productivity Council has
carried out a nationwide survey across various Leather Manufacturing units to major
constraints that are hindering the growth of leather manufacturing units in India
in terms of productivity and export competitiveness. The field survey has been
carried out across ten states in India with a view to provide sector specific
policy recommendations for enhancing productivity and export competitiveness of the
leather and leather products sector in the country.
The survey of the manufacturing units has been carried out with a structured
questionnaire (Annexure 1). The field survey tries to capture firm level
information such as turnover, employment, domestic and foreign trade, product
description, cost related information, factors affecting productivity, factors
responsible for competitiveness and specific suggestions from each of the units.
The field survey covers total 62 leather and leather products manufacturing units
spread across 10 states in India (Annexure 2).. Detailed state wise distribution of
the responding manufacturing units are given in table 6.1.
Table 6.1: Distribution of Leather & Leather Products Manufacturing Units NPC Field
Survey
Sl. No. 1 2 3 4 5
States A.P. Delhi/NCR H.P. Maharashtra Karnataka
Leather Units (Nos.) 2 11 7 1 5 LXI
Percent 3.2 17.7 11.3 1.6 8.1

6 7 8 9 10
Rajasthan Punjab T.N. U.P. W.B. Total
5 3 11 15 2 62
8.1 4.8 17.7 24.2 3.2 100
Source: NPC Field Survey, March-April 2008
Majority of the manufacturing units are based at the Industry Centers (50%) while
the remaining 50% units are based at other places. The establishment year for the
surveyed units is reported in the range of 1949 to 2008. As far as the nature of
business is concerned, 89% respondents belong to manufacturing category while 8%
reported that they belong to trading company. A negligible proportion belongs to
multinational and other categories. In terms of the nature of the company, 65%
belong to small units while 20% belong to registered manufacturing categories.
Among the sample units 58% belong to Small, 33% medium and 8% large category of
manufacturing. About 45% units have obtained quality accreditations. Nearly 63%
responding manufacturing units opined that the quality accreditations boosted their
business.
6.2 Turnover and profitability of the Units From table 6.2 it is observed that the
average annual turnover of the manufacturing units show wide fluctuations across
the states. It may be due to the fact that from each state the number of units
surveyed is not significant
LXII
enough. For example, the skewed nature of sample distribution across the states
leads to this huge variation in terms of average annual turnover across states.
However, at the all India level, the number of surveyed units is sufficient enough
to eliminate the problem of small sample. It may be noted that the average annual
turnover of the firms at all India level has shown an increasing trend except for
the year 2005-2006.
LXIII
Table 6.2: Average Annual Turnover of the 62 Leather Manufacturing Units State wise
(Rs. Lakhs)
States A.P. Delhi/NCR H.P. Maharashtra Karnataka Rajasthan Punjab T.N. U.P. W.B.
All India
2003-04 2004-05 -917 6400 10 1022 405 177 4296 2697 1251 1881 12 690 6500 17 1121
506 177 4638 3801 1525 1877
2005-06 20 676 2326 22 1222 606 177 3664 3402 1453 1676
2006-07 26 803 2107 29 1223 740 227 3610 4957 1625 1904
2007-08 80 940 2143 40 1423 633 587 3933 4975 1788 2111
LXIV
6.3 Profitability of the Manufacturing Units
The Leather-manufacturing units have been asked about the trends in average
profitability (profit after tax) during the year 1991-2000. Among the responding
units approximately 75 percent manufacturing units reported that average
profitability increased during this period. Majority of such units were small and
medium sized units. About 15 percent units reported that the profitability
decreased. As regards to average profitability after 2000, firms which experienced
an increase in their profitability increased marginally to 76% again most of the
firms were small and medium sized units [table 6.3 (a & b)]. This indicated that
the profitability of the units reveal more or less same trends during the two
periods.
Table 6.3.a: Average Profitability of the Units during 1991-2000 (Number of

Responding Manufacturing Units)
LXV
Response Small Medium Large Others Total
Increased 14 10 1 25 14
Decreased 3
No change 1 2
Total 18 12 3 33 18
2 5 3
-3 1
Table 6.3.b: Average Profitability of the Units after 2000 (Number of Responding
Manufacturing Units)
Response Small Medium Large Others Total
Increased 22 12 2 -36
Decreased 6 2 2 1 11
No change 28 14 4 1 47
Total 22 12 2 -36
The manufacturing units were further asked about the extent of increase in
profitability after 2000. About 47.5 percent respondents reported that the increase
was in the range of 0-5% while 27.5 percent reported that the increase was in the
range of 10-25% (table 6.4).
Table 6.4: Extent of increase in Profitability after 2000
Range (%)
0-5 5-10
Respondents (%) 47.50 22.50
LXVI
10-25 25- above Total
27.50 2.50 100.00
The leather manufacturing units were also asked about the decrease in
profitability. About 47 percent responding manufacturing units reported that the
decrease was in the range of 0-5% per annum after 2000 (table 6.5).
Table 6.5: Extent of decrease in Profitability after 2000 Range (%) 0-5 5-10 10-25
25& above Total Respondents (%) 47.06 5.88 41.18 5.88 100
LXVII
6.4 FDI and ICT Usage Only a few (12/62) leather manufacturing units reported any
type of Foreign Direct Investment (FDI) in their enterprises. Most of them reported
that the investment is less than 10 percent. All the manufacturing units responded
that there is no foreign ownership of their company and they didn’t acquire any
firm in foreign countries. This gives a clear indication that government should
make crucial efforts to promote foreign ownership and FDI in leather and leather
product industry.
The manufacturing units were asked about the usage of Information Communication
Technology (ICT) in the firm’s operation. It was reported that they use ICT at
varying degrees in their operations (table 6.6).
Table 6.6: Extent of ICT usage in the Unit
Range (%)
0 -5 5-10 50-Above NA
Respondents (%) 7.14 11.90 4.76 76.19
LXVIII
Total
100
As far as research is concerned, only 15 percent units reported that they are
engaged in research and development activities. However, only 8 percent units
received any product patent during the last five years. In the case of product
innovation, many manufacturing units 74 percent units reported affirmatively.
6.5 Employment Profile
It is seen from table 6.7 that the average employment across the manufacturing
units has steadily increased from 257 employees during 2003-04 to 315 employees
during 2007-08. Except during 2005-06 we notice consistent increase in employment
across the leather manufacturing units. The decline in employment reported during
2005-06 indicates that the sector is facing problems due to increasing competition.
Table 6.7: Average Employment per Unit
LXIX
Years 2003-04 2004-05 2005-06 2006-07 2007-08
Employees per Unit (Average Number) 257 276 260 286 315
Average Employment per Unit
37 Manufacturing units out of a total 62 reported that the employment has grown
during the last five years. More than 32 percent manufacturing units reported that
the range of increase of employment during the last five years is reported in the
range of 10-25 percent. About 27 percent manufacturing units reported the increase
in the employment in the range of 5-10 percent (table 6.8).
Table 6.8: Range of increase in employment
LXX
Increase Range (%) 0-5 5-10 10-25 25 & Above Total
Manufacturing Units Response (%) 24.32 27.02 32.43 16.21 100
29% responding manufacturing units reported that the casualization of labour

increased during the last five years. The respondents were further asked about the
extent of increase in wages/salary after 2000. About 26 percent respondents
reported that the salary has increased.
6.6 Trade Related Information It is seen from table 6.9 that 75% responding
manufacturing units are engaged in exports. The remaining 25% units did not engage
in any export activity. Also, when only large sized firms are considered most of
them export.
Table 6.9: Units engaged in exports (Number of Manufacturing firms)
Respondents Small Medium Large Others Total
Yes 17 (65.38) 14 (87.50) 4 (100) -35 (74.47)
No 9 (34.62) 2 (12.50) -1 (100) 12 (25.53)
Total 26 (100) 16 (100) 4 (100) 1 (100) 47 (100)
Note: Figure in bracket are percentage LXXI

As it is evident from secondary data that leather industry is dominated by
unorganized and small sized sector. This survey data also gives the same result.
64% firms export more than 50% of their total sales and most of these firms are
small sized (Table 6.10).
Table 6.10: Percentage of exports to total sales Respondents Small Medium Large
Others Total 2 (66.66) -5 (13.51) 1 (33.33) -4 (10.81) 1-10% 3 (12.50) 10-25%
3(12.50) 25-50% 3(12.50) 1 (11.11) --4 (10.81) --1(2.70) 50-75% 1 (4.16) Above75%
14 (58.33) 8 (88.88) -1 (100) 23 (62.16) Total 24 (100) 9 (100) 3 (100) 1 (100) 37
(100)
Note: Figure in bracket are percentage
As regards to export growth during the last five years, 82.9% units reported an
increase while only 8.9 percent reported a decline (Table 6.11).
Table 6.11: Growth in export during the last five years Growth in Export Increased
Decreased No Change Total Manufacturing Units Response (%) 82.9 8.6 8.6 100.0
LXXII
About 30% units reported that the increase in exports is in the range of 1-10%
while 26.7% units reported above 50% export growth during the last five years
(Table 6.13).
Table 6.12: Range of increase in exports during last five years
Range (%) 1-10 10-25 25-50 50 & Above Total
Manufacturing Units Responses (%) 30.0 26.7 16.7 26.7 100.0
As far as import by leather manufacturing units are concerned, more than 50 percent
leather manufacturing units import raw materials to meet production requirements
(Table 6.13). Not surprisingly, it was only small and medium sized firms which were
indulged in import of raw material. No large sized firm imported raw material for
production.
Table 6.13: Import by leather manufacturing units LXXIII

Yes 12 (52.17) 7 (77.78) --19 (54.29)
No 11 (47.82) 2 (22.22) 2 (100) 1 (100) 16 (45.72)
Total 23 (100) 9 (100) 2 (100) 1 (100) 35 (100)
Nearly 36% of units Import more than 75% raw materials for the units production
requirements (Table 6.14).
Table 6.14: Level of import of raw materials for units’ Production requirement
Respondents Small Medium Large 1-10% 3 (33.33) 4 (33.33) 1 (25.00) 10-25% -4
(33.33) -25-50% -2 (16.66) -50-75% --2 (50.00) 2 (8.00) Above75% 6 (66.66) 2
(16.66) 1 (25.00) Total 9 (100) 12 (100) 4 (100)
Total
8 (32.00)
4 (16.00)
2 (8.00)
9 (36.00)
25 (100)
LXXIV
However level of import of finished products have been reported to be very less
than at 10% by about 77% of manufacturing units (Table 6.15). Some of the factors
that hinder the quantity of imports are import licenses and export taxes.
Table 6.15: Level of import of finished product
Range (%) 1-10 10-25 25-50 Total
Manufacturing Units Responses (%) 76.9 15.4 7.7 100.0
From a critical analysis of export and imports it can be concluded that a larger
proportion of external trade in leather and leather product industry consists of
exports.
It is due to domination of unorganized sector in this industry that it is largely

small and medium sized units which are indulged in trade.
60% small and medium sized firms have captured a domestic market share of 1-5%
only. Also, a larger proportion of industry consists of small and medium sized
units. This implies that larger the number of firms in an industry smaller will be
the market share of each firm. (table 6.16).
Table 6.16: Domestic market share of the manufacturing unit Respondents Small
Medium 1-5% 14 (66.67) 6 (50.00) 5-10% 2 (9.52) 2 (16.67) 10-25% 2 (9.52) 2 (16.67)
LXXV 25%&Above 3 (14.29) 2 (16.67) Total 21 (100) 12 (100)
Large Others Total
2 (50.00) 1 (100.00) 23 (60.53)
--4 (10.53)
1 (25.00) -5 (13.16)
1 (25.00) -6 (15.78)
4 (100) 1 (100) 38 (100)
Note: Figure in bracket are percentage More than 50% of the firms, as survey data
shows, have domestic sales of more than 50% to their total sales and major
contributors are again small and medium sized units. (Table 6.17).
Table 6.17: Share of domestic sales to total sales Respondent s Small Medium Large
Others Total 1-10% 10-25% 25-50% 50-75% 75%Abov e 11 (45.83) 4 (28.57) 1 (25.00) 1
(100.00) 17 (39.54) Total
6 (25.00) 5 (35.42) 2 (50.00) -13 (30.23)
3 (12.50) 1(7.15) --4 (9.98)
1(4.17) 2 (14.29) --3 (6.98)
3 (12.50) 2 (14.28) 1 (25.00) -6 (13.96)
24 (100) 14 (100) 4 (100) 1 (100) 43 (100)
6.7 Cost Competitiveness

87% of the surveyed firms have experience an increase in their cost
competitiveness. Simultaneously, 70% of such firms have experienced an increase in
their labor productivity as well. This implies that increase in cost
competitiveness is significantly due to increase in labor productivity. It can also
be concluded that small and medium size units are labor intensive. (Table 6.18).
Table 6.18: Cost competitiveness of the firm during the last five years due to
labor productivity
Labor Productivity
LXXVI
Respondents Cost Increased
increased 29 (69.05) 2 (50.00) 1 (50.00) 32 (66.67)
decreased 4 (9.53) 1 (25.00) -5 (10.42)
No change 9 (21.42) 1 (25.00) 1 (50.00) 11(22.92)
Total 42 (100) 4 (100) 2 (100) 48 (100)
Competitiveness Decreased No change Total
88% of surveyed firms say that their cost competitiveness has increased and 75% of
such firms have also experienced an increase in total productivity. Thus, its not
only the labor productivity that has increased rather overall productivity of
leather productivity has increased. (Table 6.19)
Table 6.19: Cost Competitiveness of firms due to Total Factor Productivity
Total Factor Productivity Cost Competitiveness Increased Decreased 30 2 4

Respondents Increased Decreased No change 6 Total
40 2
LXXVII
No change Total
1 33 4
2 8
3 45
Manufacturing units were further asked about the contribution of various components
of cost in total cost of production. It has been reported by 45% units that the
wages and salaries constitute 10-25% total cost. The responses received from the
units with respect to various cost components have been summarized in table 6.20.
Majority respondents reported an increase in various cost components in the range
of 1-10% for most components of cost except wages and salaries, raw materials and
taxes.
Table 6.20: Ratio of various Cost Components in Total Cost of Production–Respondent
(%)
Cost Range (%) 1-10 10-25 25-50 50& Above Total
Wages & Salaries
Other Labour Related Cost 61.2 28.6 8.2 2.0 100.0
Raw Materials 5.8 21.2 34.6 36.5 100.0
Fuel Cost
Interest
Securit y
Taxes Others
39.2 45.1 11.8 3.9 100.0
59.2 24.5 12.2 4.1 100.0
67.3 28.6 4.1 -100.0
85.0 10.0 5.0 -100.0
41.2 45.1 13.7 -100.0
57.1 38.1 4.8 -100.0
6.8 Price Factors
Leather Manufacturing units have been interviewed about the price competitiveness
of their units during the last five years. More than 86% units reported that the
price competitiveness increased during the last five years. Only 8% units reported
that the price competitiveness decreased while 6% reported that there is no change.
LXXVIII
The increase of price competitiveness have been reported in the range of 1-10% by
58% units while 37% reported that the price increase was in the range of 10-25%
range. The remaining 5 percent units reported an increase in the range of 25-50%.
Only 30% manufacturing units reported that there was an increase in the price of
the products due to the increase in the import of raw materials during the last
five years.
All large sized firms surveyed have experienced an increase in price

competitiveness along with 86% of small and medium sized firms. Which implies that
price competitiveness of entire industry has increased?
6.9 Factors affecting Productivity
Most of the leather-manufacturing units interviewed (65%) reported an increase in

labour productivity during the last five years (table 6.21). Only 12% units
reported a decrease in labour productivity while another 24% reported no change.
Table 6.21: Labour productivity during last five years
Labour Productivity Increased Decreased No Change Total
Respondents (%) 64.7 11.8 23.5 100.0
LXXIX
As far as increase in labour productivity is concerned, about 49% units reported
that the labour productivity of the units increased in the range of 1-5%.
In the case of total factor productivity (output produced relative to all inputs
used), nearly 71% manufacturing units reported an increase while 13% units reported
decrease and another 16% units reported no change in total factor productivity
during the last five years.
LXXX
6.10 Factors responsible for Competitiveness of the Units
Manufacturing units were interviewed about the competitiveness of the unit during
the last five years, overwhelming 79% units reported that the competitiveness of
the units increased while the remaining 21% units were of the view that the
competitiveness either decreased or remained stagnant. As regards to the
availability of raw materials, more than 67% units reported that it is available
within the country; another 17% reported that the raw material is imported. Only
13.5% units reported that the raw materials are available within the region. In the
case of the availability of quality human resources during the last five years, the
units have given mixed responses as 53% units reported that there is an increase
while 40% units were of the opinion that it decreased during the last five years
another 7% units reported no change.
As regards to the quality of the present educational system for catering to the
requirements of the leather industry, 57% units are satisfied whereas 43% units are
not. Nearly 70% units reported that the labour relations in the states are
productive. Only 30% units are not satisfied with labour relations in the states.
About 61% manufacturing units are not satisfied with the quality of infrastructure
(both social and physical) in the state.
As far as Government interface with business/private sector is concerned, about 69%

respondents are not satisfied while 31% units reported that they are satisfied. The
units are further interviewed whether state government is friendly towards
investors while 72% reported positively the remaining 28% reported negatively.
Similarly, the extent of computerization of government records 73% units reported
that they are satisfied while 27% were not satisfied. In the case of corruption
level in the government, overwhelming 64% units reported that it increased during
the last five years. Only 10% units reported that it decreased while 26% reported
of no change in corruption levels. As regards to transparency in government 55%
units are satisfied while 45% units are not satisfied with it.
6.11 Research and development expenditure and Product innovation LXXXI

In last 5 years only 21% of the firms have incurred R&D expenditure. The field
survey gives us a picture that most of the small sized firm doesn’t spend on
research and development but almost all large sized firms are indulged in research
and development activities (table 6.22).
Table 6.22: Research and Development Expenditure by Manufacturing firms
Yes 2 (6.89) 5 (35.72) 3 (100.00) -10 (21.28)
No 27 (93.10) 9 (64.28) -1 (100) 37 (78.73)
Total 29 (100) 14 (100) 3 (100) 1 (100) 47 (100)
This field survey draws a picture that only 21 %( approx) firms spend on R&D but
all of them haven’t introduced any new product in last five years. Only 60% of such
firms have done it. As previous analysis shows that a small proportion of small
sized firms are involved in R&D we can conclude that most of the time these are the
large sized firms which provide new products to the market and variety to consumers
(table 6.23).
Table 6.23: R&D and Product Innovation
Respondents Yes No
Yes 6 (60.00) 4 (11.74)
No 4 (40.00) 30 (88.23)
Total 10 (100) 34 (100)
LXXXII
Total
10 (22.73)
34 (77.27)
44 (100)
6.12 Factors affecting competitiveness of the Units
Based on the field investigations and discussion with various stake holders, the
following factors have been identified which affect the Competitiveness of Leather
and Leather products manufacturing in India.
• • • • • • • • • • • • •
Fluctuations in foreign exchange or rupee appreciation against dollar. Global

competition intensified Increase in raw material price. Various Government trades
and export policies are not favorable for the growth the sector. Quality of product
needs improvement. Increasing labour cost. Fuel cost increase. Competitions from
china. Dominance of small manufacturers. Interest rates are very high. Shortage of
skilled manpower. Shortage of power supply. High Power & Water charges & Improper
and irregular supply.
LXXXIII
• • • • • •
Procedural delays in export clearance. High Import and excise duty cost. Labour
problems in organized sector. Lack of market intelligence and market planning.
Stringent Pollution Norms. Need to open outlets and showroom all over the country.
6.13 Measures taken by Manufacturing Units for boosting domestic & export
competitiveness during last five years The leather manufacturing units have adopted
a number of measures during the last five years to boost domestic and export
competitiveness. • • • • • • • • • • • • • • • • • • • Better Quality web site for
promoting marketing of products. Quality control measures adopted to get the
product accredited through quality and concern systems like ISO9001 and ISO14001.
Increased marketing & advertisement Opening more distribution outlet in rural area
to capture the domestic market Financial incentives Leather industry is growing but
still latest technology, trained workers and quality is lacking Competition is
increasing and in future it is going to intensify Facilities like tax exemption on
small scale sector may be given Measures to tackle frequent labour unrest/strikes
except for grievances/demands. Quality manpower, knowledge management and latest
technology Quality labour from ITI recruited. Raw material cost is very high,
Requirement of Good infrastructure for stable production Protection from Chinese
dumping required Establishing more distribution outlet in rural area to capture the
domestic market Measures taken to tackle frequent labour unrest/strikes except for
grievances/demands. Quality manpower, knowledge management and latest technology
introduced in the production process Better designs and tools made available
Productivity measures have been improved to become competitive
LXXXIV
CHAPTER VII
RECOMMENDATIONS
Since the study was undertaken with limited budget the limited resources available
in terms of finance, the unit level data coverage was undertaken with a limited
scope and coverage. However, efforts have been made to minimize such constraints
through analyzing various data sources available to arrive at broad recommendations
for the development of the sector. The recommendation have been formulated which
are implementable in nature.
Quality of Product
There is an urgent need to improve product quality and efforts should be made to
promote quality systems among the leather and leather products manufacturers to
ensure sustained product quality. Towards this emphasis should be placed on
strengthening improved design, development and prototyping. Quality Council of
India and BIS can provide sufficient support for identifying and establishing
quality standards for the leather industry.
Branding Requirements • Currently large numbers of SME units are producing quality
leather products but are unable to realize the advantage due to lack of branding.
Goal through its developmental agencies should promote branding of quality products
produced by large number of small manufactures. An incentive scheme in terms of
product branding may be introduced for an initial period of five years. Central
Leather Research Institute along with Ministry of Commerce & Industry, Industry
Associations and NMCC can evolve schemes to address this critical issue.
Niche Marketing
Since the traditional exports markets for Indian leather products such as USA, EU
etc. are facing stiff competition from other developing countries, the exporters
need to focus on niche market. Industries should focus on woman’s fashion footwear,
where India has design advantage and cost competitive as compared to other
exporting countries mainly East European countries. National Institute of Fashion
Technology, National Institute of Design along with NMCC can evolve appropriate
action plans to address this issue.
LXXXV
Tannery Modernization
On the technology front, most of the existing tanneries use outdated technology
which inhibits them from producing good quality leather in spite of access to
quality raw materials such as hides and skins. The tanneries require high doses of
capital investment in order to improve the existing technology so that Quality
leather could be produced and supplied to leather manufacturing units. The Tannery
Modernization Scheme of the Government of India provides investment grants for
enabling the small and medium enterprises to readjust quickly to the changed
circumstances of WTO regime. Tanneries in China and other major competing countries
have invested significant amounts of funds in large tanneries. Therefore, it is
recommended that Ministry of textiles and Ministry of Commerce & Industry need to
invigorate the existing modernization scheme and make it more acceptable.
Environmental Norms/Regulations
Various leather producing units should be encouraged and be given incentives to

adopt adequate pollution control measures. Since the Leather and leather products
sector especially the tanneries are facing a lot of problems in terms of
Environmental norms, there is an urgent need for modernizing the existing ones and
also setting up new common effluent treatment plants at various leather industry
clusters as per international standards. Ministry of Environment & Forests can act
as a facilitator along with State Pollution Control Boards and Industry
associations can provide the guidelines and assistance for setting up common
effluent Treatment plants at major Leather clusters.
Cluster Development
Another area where immediate intervention is required is developing integrated

leather based product manufacturing clusters with Special Economic Zone facilities
to be established, at major producing centers such as Ambur in Vellore district in
Tamil Nadu, Agra and Kanpur in UP and Kolkatta in West Bengal. Govt. may set up
manufacturing clusters for leather and leather products on the times of SEZs.
Cluster approach will ensure lower cost of raw material as well as proper and
pinpointed implementation of detailed policy package and ensure a clear road map
for the fast track growth and development of the sector. It should also incorporate
aggressive marketing plan and a coordinated time bound action plan to realize full
potential of the sector. Ministry of MSME along with NMCC can identify the areas
where Clusters development Programme need to be undertaken.
Rationalization of Duty Structure
LXXXVI
•
It is essential to rationalize both the internal and external duty structure of

inputs needed for the sector. In addition to the rationalization of the duty
structure schemes are needed to encourage the existing producers of leather
products for technological up gradation. Modernization requires a heavy dose of
investment for which availability of capital is a major constraint. Since, most of
the players in the leather sector are small and tiny industries, the government
should take proactive steps for easing the capital constraint. Ministry of Commerce
& Industry and Ministry of MSME along with NMCC can evolve strategies to
rationalize the duty structure of inputs.
FDI in Leather Industry • The other option could be to encourage FDI in the leather
sector. In order to increase FDI in the Indian leather sector it is essential to
encourage good governance and global bench mark of best practices and provide good
infrastructure for the sector. Suitable measures to attract large FDIs and JVs in
leather sector from potential investors from abroad would help in meeting the
additional capital requirement of the sector. Ministry of Commerce & Industry along
with NMCC can organize B2B meets to facilitate and encourage Foreign investment in
the sector.
Skilled Manpower Requirement • Vocational training through ITI s, Textile Design &
Management Institutions specially in the area of Apparel Manufacturing, Quality
Control and Designing needs to be encouraged so that skilled work force is
available. Leather development Institutes needs to develop and organize training of
trainers for development of workers and artisans of Leather sector. In order to
increase the availability of a large number of skilled workers and artisans,
efforts should be made to enhance the training and capacity building infrastructure
in the country. Ministry of HRD along with AICTE and Industry Associations in
tandem can develop special modules for ITIs and other educational institutions for
addressing the current needs of the sector.
Duty Drawback for Exports • leather and leather products sector being labor
intensive provides employment to millions of skilled and semiskilled labor force.
The sector is adversely affected by the current global meltdown and it is essential
to provide a policy package in terms of reduction of taxes, credits at lower rates
as well as duty drawback for exporters. Ministry of Commerce & Industry along with
NMCC and Industry Associations can work out appropriate stimulus packages for
supporting the sector.
Need for Database
LXXXVII
•
Various suggested measures like review of policies which involves time to time
assessment of strength and weaknesses of the sector, preparation of appropriate
detailed policy package and detailed road map etc., are almost impossible to adopt
in the absence of coherent statistical data base. Hence, it is essential that a
comprehensive statistical data base may be developed for Indian leather sector.
Leather exhibition and leather machinery fares/exhibitions needs to be organized
more and more. Central Statistical Organization under Ministry of Statistical
Programme Implementation along with NMCC and Industry Associations can work out the
details regarding collection, classification, and compilation of required data.
LXXXVIII
Economic Stimulus Package • The central excise duty has been reduced by GoI as part
of the economic stimulus packages Announced on December 7, 2008. The central excise
duty on footwear of MRP between Rs.250/pair to MRP Rs. 750/pair has been reduced
from 8% to 4% and for footwear of MRP exceeding Rs. 750/pair has been reduced from
14% to 10% as part of the economic stimulus package. In the stimulus package
announced on February 24, 2009, there has been reduction in the general rate of
central excise duty from 10 per cent to 8 per cent. The excise duty on footwear of
MRP exceeding Rs. 750/pair has now been further reduced from 10% to 8% in the third
stimulus package after being reduced from 14% to 10% in the first fiscal stimulus
package. Ministry of Commerce & Industry along with NMCC and Industry Associations
can plan for further reductions in duty structure.
LXXXIX
REFERENCES
Business Line-Hindu Business Line February 04, 2005, (Global leather cos keen to
set up shop in India)
Business Line- The Hindu Business line, March 22, 2005, (An interview with
Rafinesque Ahmed, Chairman)
CII, New Delhi. (2006), (The Indian Footwear & Leather Industry: Key Challenges &
Opportunities)
CMIE, Foreign Trade and Balance of Payments (various issues)

CRISIL- NMCC-March 2009, Enhancing Competitiveness of Indian Manufacturing
Industry: Assistance in Policy Making, Final Report submitted to National
Manufacturing Competitiveness Council.
Ghosh Jayati (2002) A Case Study of India, (Globalization, Export-Oriented

Employment for Women and Social Policy), Social Scientist, Vol. 30, No. 11/12 (Nov.
Dec., 2002), pp. 17-60
Central Statistical Organization, Annual Survey of Industries (various issues)
Economic Survey: 2006-07, 2007-08 2008-09, Ministry of Finance

http://www.tdctrade.com/imn/06050201/footwear048.htm International Market News
(India's unique dance to footwear dominance)
Kelkar V.L. & Rajiv kumar (1990) Industrial Growth in the Eighties, Emerging Policy
Issues, Economic and Political Weekly, 27 January
XC
Kurien, CT (1993) Indian Economic Reforms in the Context of Emerging Global
Economy, Economic and Political Weekly, April 10, pp 655-65.
Leathers Monthly Magazine of the Council for leather Exports, Various issues.
Mathur Shobha (2005) Moving up the value chain, Industrial Economist, February 15
Sinha, Saurabh and Sanjay Sinha (1992) Leather Exports: An Illusory Boom, Economic
and Political Weekly, August 31, pp M-111-116
Tewari Meenu (2005) Global Standards and the Dynamics of Environmental Compliance
in India's Leather Industry, Oxford Development Studies, Volume 33, Issue 2 June
2005 , pages 245 – 267. UNCTAD (2007) Trade Globalization and Development Oct 2006-
May2007, New Delhi, India.
XCI
WEB SITES
(a) www.newindia.com/klid/ (b) www.leatherindia.org (c) www.
iilfleatherfair.com/register_now.html (d) www.icmr.icfai.org/casestudies (e)
www.leatherindia.org (f) www.ciionline.org/news_new (g)
www.nmcc.nic.in/pdf/Interview_v_Krishnamurthy.pdf (h) www.
planningcommission.nic.in/plans/annualplan/1999-00 (i)
www.indiabiznews.com/biznews/ (j) www.chinashoesexpo.com/ (k)
www.newindia.com/klid/ (l) www.leatherindia.org (m)
www.iilfleatherfair.com/register_now.html (n) www.ciionline.org/news_new (o)
www.nmcc.nic.in/pdf/Interview_v_Krishnamurthy.pdf (p) www.indiabiznews.com/biznews/
(q) www.chinashoesexpo.com/ (r) www.indianleatherportal.com (s)
www.tdctrade.com/imn/06050201/footwear048.htm International Market News (India's
unique dance to footwear dominance)
XCII
Annexure – 1
Survey Questionnaire: Company/Manufacturing Unit
National Productivity Council is carrying out a Nation wide survey across four
Manufacturing Sectors (Food Processing, Textile & Clothing, Leather & Leather
Products and Electronics & IT hardware) on behalf of National Manufacturing
Competitiveness Council (NMCC), DIPP, Ministry of Commerce and Industry, GoI. The
objective of this stakeholder survey is to identify and understand major
constraints that are hindering the growth of manufacturing sector in the path of
productivity growth and export competitiveness and to suggest Sector Specific
recommendations to NMCC with a view to enhance sectoral/manufacturing productivity
and export competitiveness.
(Please fill as per instructions given with each question. Write codes/ values in
the box provided at the right hand side)
1.0 Sector (1= Food Processing, 2 = Textile & Clothing, 3 = Leather & Leather
Products, 4 = Electronics & IT Hardware) State (1 = AP, 2 = Delhi & NCR, 3=
Gujarat, 4 = Himachal Pradesh, 5=Maharashtra, 6=Karnataka, 7 = Kerala, 8 = North
East, 9 = Rajasthan, 10 = Punjab, 11 = Tamil Nadu, 12 = UP, 13= West Bengal) 3.0
Location (1= Industry Centre, 2 = Cluster, 3 = EPZ, 4 = SEZ, 5=Others
2.0
XCIII
Factory/Unit/Organisation specific information
4.0 Company Name & Address: -------------------------------------
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
-------------------
Website if any:----------------------------------------------------------------
Contact Person’s
Name----------------------------------------------------------------Telephone if
any: ---------------e-mail address if any:
---------------------------------------------------4.1 4.2 Year of Establishment
What is the Primary Business of your company ? (1=Manufacturing, 2=Trading Company,
3= Multinational company, 4=Others, _______________________________________________
4.3
What is the nature of your company? (1= Small Scale Sector, 2=Informal Sector, 3=
Registered Manufacturing, 4= Others)
What is the category of your company? The primary Business (1= Small, 2=Medium,
3=Large, 4=Other,)
4.4
4.5
Does Your organization has Quality Accreditation like ISO 9000, HACCP etc? (1= yes,
2=No)
4.5.2
If yes, please specify whether the accreditation has helped in boosting business
growth? (1= yes, 2=No) Annual turnover of your organization/Company/Enterprise (Rs
lakhs) 2003-04 2004-05
4.6
XCIV
2005-06 2006-07 2007-08 4.7 Average profitability (Profit After Tax) of your
enterprise during 1991 to 2000 (considering 1991 as base year) (1= Increased, 2=
Decreased, 3=No Change) Average profitability (Profit After Tax) of your enterprise
after 2000 (keeping 2000 as base year) (1 = Increased, 2= Decreased, 3=No Change)
What was the extent of increase in profitability after 2000 (keeping 2000 as base
year) (1=0-5%, 2=5-10%, 3=10-25%, 4=25% & above) What was the extent of decrease in
profitability after 2000 (keeping 2000 as base year) (1=0-5%, 2=5-10%, 3=10-25%,
4=25% & above) Share of Foreign Direct Investment in your Enterprise (1=0-5%, 2=5-
10%, 3=10-25%, 4=25-50%, 5= Above 50%, 6=Not Applicable) 4.10 What is the extent of
foreign ownership of your company? 1=No foreign ownership, 2=Foreign partner(s)
have less than or equal to 50% ownership, 3=Foreign partner(s) have more than 50%
ownership, 4=Other) 4.11 Did your organization acquire any firm in other countries?
(1=No acquisition, 2= Full ownership, 3=less than or equal to 50% ownership, 4=more
than 50% ownership,) 4.12 Extent of Usage of ICT in firms’ operation/production.
(1=0-5%, 2=5-10%, 3=10-25%, 4=25-50%, 5= Above 50%, 6=Not Applicable) 4.13 Did your
Organisation conduct/commission any Research & Development (R &D) during the last
five years? (1= yes, 2=No,)
4.8
4.8.1
4.8.2
4.9
XCV
4.14
Did your Organisation get any product patented during the last five years? (1= yes,
2=No,)
4.14.1 If yes, please mention the number & name of the product
4.15
Did your Organisation introduced any product innovations during the last five
years? (1= yes, 2=No,)
4.15.1 If yes, please mention the number & name the innovation
XCVI
5.0 5.0
Employment Related Information

Total Number of Employees in your organization (Nos) 2003-04 2004-05 2005-06 2006-
07 2007-08
5.1
Employment growth in the organization during the last five years. (1= Increased, 2=
Decreased, 3=No Change,) If Increased, please specify the range of increase in
employment during the last five years? (1=0-5%, 2=5-10%, 3=10-25%, 4=25% & above)
5.1.1
5.1.2
If decreased, please specify the range of decrease in employment in your

organisation in the last five years? (0=1-5%, 2=5-10%, 3=10-25%, 4=25% & above)
(specify) The casualisation of labour during the last five years has (1=Increased,
2=decreased, 3=No change, 4=Don’t know) Growth in wages/salary in the organization
after 2000 (with 2000 as base) (1= Increased, 2= Decreased, 3=No Change,) If
Increased, please specify the range of increase in wages/salary in your
organisation in the last five years? (1=0-5%, 2=5-10%, 3=10-25%, 4=25% & above)
5.2 5.3
5.4
5.5
If decreased, please specify the range of decrease in wages/salary in your

organisation in the last five years? (1=15%, 2=5-10%, 3=10-25%, 4=25% & above)
Trade Related Information Is your organization engaged in Exports (1=Yes, 2= No)
XCVII
6.0
6.1
If yes, what is the percentage of Export to Total Sales (1=1-10%, 2=10-25%, 3=25-
50%, 4=50-75% 5=Above 75%)
6.2
Growth in export during the last five years. (1= Increased, 2= Decreased, 3=No
Change,) If Increased, please specify the range of increase in export during the
last five years? (1=0-10%, 2=10-25%, 3=25-50%, 4=50% & above)
6.2.1
6.2.2
If decreased, please specify the range of decrease in export in during in the last
five years? (1=0-10%, 2=10-25%, 3=25-50%, 4=50% & above)
6.3
Is your organization engaged in Imports (1=Yes, 2= No)
6.3.1
If yes, what is the percentage of Import to Total Sales (1=1-10%, 2=10-25%, 3=25-
50%, 4=50-75% 5=Above 75%)
XCVIII
6.4
If yes, the level of import of raw material for your company’s production
requirement. (1=0-10%, 2=10-25%, 3=25-50%, 4=50-75% 5= 75 & above)
6.5
The level of import of finished products by your company? (1=0-10%, 2=10-25%, 3=25-
50%, 4=50-75% 5= 75 & above)
6.5.1
Please specify the major country from where you are importing finished products.
___________________________________________ Please mention your export destinations
Product Description Countries you were trading in the past
6.6 6.6.1
6.6.2
Product Description
Countries you are Currently trading with (Country Name)
Please mention the name of competing Countries Also specify the Competitive
Advantage of that Country: (1=Cost of Product, 2= Latest Technology, 3=Quality of
product, 4=Other)
XCIX
6.6.3
Product Description
Countries you are planning to trade in near future
6.7
The factor (s) hindering the quantity of imports (1= Import pricing Scheme,2=
Import licenses, 3=Import quotas, 4=Import prohibition, 5=Quantitative safeguard
measures, 6=Export restraint arrangement,7=Non trade Barriers, 8=Any other)
C
6.8
The factor (s) affecting the export of your products (1=Export taxes, 2= Export
quantitative restriction, 3=Certification, 4=Inspection fee, 5=State trading
administration, 6=Dual pricing schemes, 6=Non trade barriers,7=Any other)
7.0
Domestic Market Related Information What is the market share of your product?
Please specify the range (1=1-5%, 2=5-10%, 3=10-25%, 4=25% & above)
7.1
What is the percentage of Domestic Sales to Total Sales (1=1-10%, 2=10-25%, 3=25-
50%, 4=50-75% 5=Above 75%)
7.2
Growth in the domestic demand of your products after 2000 during last five years.
(1= Increased, 2= Decreased, 3=No Change) If Increased, please specify the range of
increase in the domestic demand of your products in the last five years? (1=1-5%,
2=5-10%, 3=10-25%, 4=25% & above) If decreased, please specify the range of
decrease in the domestic demand of your products in the last five years? (1=1-5%,
2=5-10%, 3=10-25%, 4=25% & above) Extent of competition in the domestic market from
local companies? Please specify the range [1=Intense (>20 players), 2=Medium (10to
20 Players), 3=Low (0-10 Players), 4=No Competition] Cost Related Information The
Cost competitiveness of your company during the last five years. (1= Increased, 2=
Decreased, 3=No Change, 4=Other)
7.2.1
7.2.2
7.7
8.0
8.1
If Increased, please specify the range of increase in cost competitiveness of your

products in the last five years? (1=110%, 2=10-25%, 3=25-50%, 4=50% & above) If
decreased, please specify the range of decrease in cost competitiveness of your
products in the last five years? (1=1-
8.2
CI
10%, 2=10-25%, 3=25-50%, 4=50% & above) 8.3 Please indicate the Current percentage
(%) contribution of the following components to total cost of production Wages &
Salaries (1=1-10%, 2=10-25%, 3=25-50%, 4=50% & above) Other labor related cost
(1=1-10%, 2=10-25%, 3=25-50%, 4=Above 50%) Raw Materials (1=1-10%, 2=10-25%, 3=25-
50%, 4=50% & above) Fuel and Energy (1=1-10%, 2=10-25%, 3=25-50%, 4=50% & above)
Interest Charges (1=1-10%, 2=10-25%, 3=25-50%, 4=50% & above) Security (1=0-10%,
2=10-25%, 3=25-50%, 4=50% & above) Taxes (1=0-10%, 2=10-25%, 3=25-50%, 4=50% &
above) Others(1=0-10%, 2=10-25%, 3=25-50%, 4=50% & above) Please indicate the
Change in contribution of the following components to total cost of production
8.4.1 The share of wages and salaries in the cost of production over the last five
years (1= Increased, 2= Decreased, 3=No Change) The share of Other labor related
cost in the cost of production over the last five years,( 1= Increased, 2=
Decreased, 3=No Change) The share of Raw Materials in the cost of production over
the last five years, (1= Increased, 2= Decreased, 3=No Change The share of Interest
Charges in the cost of production over the last five years, (1= Increased, 2=
Decreased, 3=No Change) The share of Security in the cost of production over the
last five years, (1= Increased, 2= Decreased, 3=No Change) CII
8.3.1
8.3.2
8.3.3 8.3.4
8.3.5
8.3.6 8.3.7 8.3.8 8.4
8.4.2
8.4.3
8.4.4
8.4.5
8.4.6
The share of taxes in the cost of production over the last five years, (1=
Increased, 2= Decreased, 3=No Change The share of other elements in the cost of
production over the last five years, 1= Increased, 2= Decreased, 3=No Change) Is
there any increase in cost of production of your product in recent years due to
increase in exports of raw materials. (1= Yes, 2=No) If yes, please specify the
range (1=1-5%, 2=5-10%, 3=10-25%, 4=25% & above) Is there any increase in cost of
production of your product in recent years due to decrease in imports of raw
materials. . (1= Yes, 2=No). (1= Yes, 2=No)If yes, please specify the range (1=1-
5%, 2=5-10%, 3=10-25%, 4=25% & above) Is there any decrease in cost of production
of your product in recent years due to increase in exports of raw materials? If
yes, please specify the range (1=1-5%, 2=5-10%, 3=10-25%, 4=25% & above) Is there
any decrease in cost of production of your product in recent years due to increase
in imports of raw materials. . (1= Yes, 2=No) If yes, please specify the range
(1=1-5%, 2=5-10%, 3=10-25%, 4=25% & above) Price Related Information The Price
competitiveness of your products during the last five years. (1= Increased, 2=
Decreased, 3=No Change)
8.4.7
8.5.1
8.6.1
8.7.1
8.8.1
9.1.1
If Increased, please specify the range of increase in Price competitiveness of your

products in the last five years? (1=010%, 2=10-25%, 3=25-50%, 4=50% & above) If
decreased, please specify the range of decrease in Price competitiveness of your
products in the last five years? (1=010%, 2=10-25%, 3=25-50%, 4=50% & above) Is
there any increase in Price of your product during the last five years due to
increase in imports of raw materials? (1= Yes, 2=No) If yes, please specify (1=1-
5%, 2=5-10%, 3=10-25%, 4=25% & above)
9.1.2
9.2.1
CIII
9.3.1
Is there any increase in Price of your product in last five years due to increase
in exports of raw materials. (1= Yes, 2=No) If yes, please specify the range (1=1-
5%, 2=5-10%, 3=10-25%, 4=25% & above) Is there any decrease in Price of your
product in last five years due to increase in imports of finished goods. (1= Yes,
2=No) If yes, please specify the range (1=1-5%, 2=5-10%, 3=10-25%, 4=25% & above)
Is there any decrease in Price of your product in last five years due to decrease
in exports of finished goods. (1= Yes, 2=No) If yes, please specify the range (1=1-
5%, 2=5-10%, 3=10-25%, 4=25% & above) Factors Affecting Productivity The Labour
Productivity (out put produced relative to number of workers/employees used) of
your firm during the last fiveyear (1= Increased, 2= Decreased, 3=No Change) If
Increased, please specify the range of increase in Labour Productivity in your
enterprise in the last five years? (1=1-5%, 2=5-10%, 3=10-25%, 4=25% & above) If
decreased, please specify the range of decrease in Labour Productivity in your
enterprise in the last five years? (1=1-5%, 2=5-10%, 3=10-25%, 4=25% & above) The
Total Factor Productivity (i.e., output produced relative to all inputs used) of
your enterprise during the last five-years (1= Increased, 2= Decreased, 3=No
Change) If Increased, please specify the range of increase in Total factor
Productivity in your enterprise in the last five years? (1=1-5%, 2=5-10%, 3=10-25%,
4=25% & above) If decreased, please specify the range of decrease in Tota factor
Productivity in your enterprise in the last five years? (1=1-5%, 2=5-10%, 3=10-25%,
4=25% & above) Identify the main factors that have affected labour productivity in
your Enterprise in the last five Years (Please mention five)
9.4.1
9.5.1
10.0 10.1
10.1.1
10.1.2
10.2
10.2.1
10.2.2
10.3
CIV
1.
2.
3.
4.
5.
CV
10.4
Identify the main factors that have affected Total Factor productivity in your
Enterprise in the last five Years (Please mention five) 1.
2.
3.
4.
5.
10.5
Have you introduced any measures that have enhanced the labour productivity of your
enterprise in the last five years? (1= yes, 2= No)
10.5. 1
If yes, (Please Specify)
10.5. 2
If No, Please indicate the reasons
CVI
10.6
Have you introduced any measures that have enhanced the Total Factor Productivity
of your enterprise in the last five years? (1= yes, 2= No) If yes, (Please Specify)
10.6. 1
10.6. 2
If No, Please indicate the reasons
11.0
Factors responsible for Competitiveness The competitiveness of your company during

the last five years. (1= Increased, 2= Decreased, 3=No Change)
11.1
Availability of Raw materials for production? 1=Imported, 2=Within country,

3=Within Region/State, 4= Other (Please specify)
CVII
11.2
Availability of Quality Human Resource in the last five years (1= Increased, 2=
Decreased, 3= No change)
11.3
Does the present Educational system in the country is catering to the industry’s
requirement? (1= yes, 2= No) Labour relations in the state are productive? (1= yes,
2= No) Are you satisfied with the quality of infrastructure (both Social and
physical) available in your state? (1= yes, 2= No) If No, Please specify the
physical infrastructure that requires attention towards development and
maintenance? (1= Road, 2= Rail, 3=Airport, 4= Port, 5= Power, 6= ICT, 7= Cold
storages & warehouses, 8=Other) (Please Specify) If No, Please specify the social
infrastructure that requires an attention towards development and maintenance?
(1=School, 2= Higher Education, 3=Technical Institution, 4= General Hospital, 5=
Specialized Medical Centres, 5=Other) (Please Specify)
11.4 11.5
11.5.1
11.5.2
11.6
Are you satisfied with the Government’s interface with business/private sector ?
(1= yes, 2= No) Is your State government is friendly towards investors? (1= yes, 2=
No)
11.7
11.8
Are you satisfied with the extent of computerization of government records? (1=
yes, 2= No) Corruption level in the government during last five years. (1=
Increased, 2= Decreased, 3=No Change)
11.9
11.10
Are you satisfied with the Transparency in your government? (1= yes, 2= No)
12.0 Identify the main factors that have affected the competitiveness of your
industry in the last five Years (Please mention five) CVIII
1.
2.
3.
4.
5.
CIX
13.0 What measures have you taken over the past five years to boost Competitiveness
in the domestic and export markets?
14.0 What are your views regarding the enhancement of Productivity and
Competitiveness in India? (Please mention)
15. Policy Interventions that are urgently required from the Government for
enhancing productivity and competitiveness of your sector (Please mention five)
1.
2.
3.
4.
5. CX
16.0. Any other comments : (Please specify )
Thank you
Name of the Official/Investigator:------------------------------------------------
Signature
: -----------------------------------------------------------
Place of Survey
: ---------------------------Date: ------------------------
Annexure – 2
LIST OF UNITS CONTACTED FOR THE STUDY
Rahman Industries Ltd., 184/167, Wajidpur, Jajmau, Kanpur 208 010, U.P. Prachi
Leathers Pvt. Ltd., C3, Udyog Nager, Near New CTI, Kanpur 208 022
CXI
Qaiyum Leather Rohit Surfactants (P) Ltd., 98-B, Dada Nagar, Kanpur Mirza
International Ltd., 14/6, Civil Lines, Kanpur United Exim, 14/106, Civil Lines,
Kanpur 208 001 Unique International, 980-D, Wajidpur, Jajmau, Kanpur 208010 Model
Tanners Ltd., Unnao, Kanpur Star International Pvt Ltd., Star Towers 109/366-2,
R.K. Nagar, G.T. Road, Kanpur Superhouse Limited, 150 sr. Road Jajmau, Kanpur Vinit
Gloves Manufacturing Pvt Ltd., P-44 Udayan Industrial Estate, 3 Pagladangs Road
Kolkata Poeja Exports A17/4 General Flowe Petedh Complex, Dapods Road, Owal
Bhiwand: Haryana-chemical Leather Limited, 1004 Bhipaji cama Bhawan, Bhikaji Cama
Place New Delhi Ashma International X/2980, Gali No.4, Raghupura No. 2, Gandhi
Nagar New Delhi Indi Part Apparels (New name Think Fashion)220-A,First floor, Rama
Market, Pitampura, New Delhi AlAlban International, B-97/B, Jwahar Park Devli Road,
Khanpur New Delhi T. abdul wahid&Co. M.C. Road, Solur, Ambur, Vellore Distt. Model
Tanners (India) Pvt Ltd.,c/o Sultantanners M/s Overseas Leather Goods Co. Pvt
Ltd.,, 61A/14, Beliaghata Main Road, Kolkata Evergreen international Limited, 756,
Udyog Vihar, Phase-V, Gurgaon Dawar Footwear Footwear Ind. 12.5 K.M. agra Delhi
Road, Sikandra, Agra Sara Ladher, 86 Bajnnai Ko.7 sr., Pannel Chennai Basant
Overseas, Opp. Amar Ujala Press, NH By-Pass Road, Agra Gupta Overseas, Bye Pass
Road, Agra, India Sanghavi Shoes Accessories Pvt. Ltd., 11, Hari kurpa Raod, 10th
Road, Chembur, Mumbai Ramjee Leather Supplies,A-Arumabakkam, Chennai-106,TN14,
Sidco Indl Estate Mayur Uniioquoters Ltld.28, IV Floor,Laxmi Complex, Jaipur. R.P.
Rubber Products Pvt. Ltd.,B-111C, Road No.9-C, VKI, Jaipur Nagna Foot Exorters,
949, Nnak Ki Chakki, Rehana Nagna Cmahak, Raniganj Bazar, Jaipur
CXII
Sanjay Leather Factory, S-258, G. Road No 5F1Vishvakarma Indl Area, Jaipur T. Abdul
wahid& Co. M.C. Road, Solur, Am,bur, Vellore. Distt. Iman Exports, 5, Nabikham
subeden street, periament, Chennai Bachi Shoes (India) Pvt. Ltd., 15, Sami Street,
Periamet, Chennai-600 003 Franco Leone Shoes P. Ltd., 122 HPSIDC, Baddi Solan C & E
Ltd., Plot No. 120, Industrial Area, Baddi Oscal Leather (P) Ltd., E - 221,
Industrial Area, Phase VIII B, Mohali DS Shoes Co., 20B EPSP Phase I Jharmajr C&E
Ltd., Plot No. 69 B, HPSSDC Baddi Kadhi Ashram Gram Silpa, 192-193, 17C, Chindigarh
Drisn Shoes, I.A. Phase-I Pancnkula Phulkari Punjab Govt. Emgrium , 27, Sector-17E
Chandigarh Reeaok, Vin Dherowal M&B Footwears Pvt Ltd.,, 79 CPSP Phase-I Inarmajri.
Baddi VBL Innovations Mib.III) Jharmajri .M.P. Kayishema Creatives 4578, Ist Floor,
Mahavir Bazar, Cloth market Fatechpuri, New Delhi AVG 12pex Pvt Ltd.,, 37, Rani
Jhansi Road, New Delhi Kirpal Export Overseas, BP-130, shalimar Bagh (West), New
Delhi Bagga Industries, 5/2 Maya Puri, Industrial Area, Phase-2, New Delhi Trane
workel trading co. 29994/2A, Street No. 17, Ranjit Nagar, New Delhi Balothia Shoe
Maker, Opp. Sawai Man Singh Town Hall, Hawa Mahal Bazar, Jaipur 302002 Yoro
Leathers, 80. MES Road, Ganapayhi Puran, Tambarm, Chennai UJP Enterprises, 63, MES
Road, East Tambram, Chennai 600059 Baba Center, 9-1-A1, Road, Indistrial Nacharan,
HyderABAD-76 Sterling Shoes, Plot No. 5-A/8, IDA, Nacharam, Hyderabad 500076, AP
CXIII
Annexure - 3
Methodology Adopted for Partial and Total Factor Productivity Estimations
Productivity can be measured in terms of both partial and total factor productivity
methods. Most commonly used partial productivity measures are Labour Productivity
and Capital Productivity estimations. The partial productivities are measured as a
ratio of Gross Value Added per worker or per unit of capital invested.
The partial productivity methodology is based on the premise ‘ceteris paribus’ that
only two factor inputs used in the production process such as labour and capital.
Details regarding the data construction and estimation procedures are given as
below.
A. Labour Productivity
Labour input is considered as the total number of persons engaged in the production
process. The data has been compiled from Annual Survey of Industries summary
results for factory sector data base for various years. The Gross Value Added data
has been first deflated by the whole sale price index for the leather(Broad
Category). The formula for calculating the labour productivity can be given as
follows: Labour Productivity (LP) = ((Gross Value Added/Price Index) X 100) No. of
Persons Engaged
Labour Productivity Growth
Once the labour productivity has been calculated, we can estimate annual labour
productivity growth using the growth rate estimation formula : Labour Productivity
= Growth Labour Productivity t – Labour productivity t-1 100 Labour Productivity t-
1
CXIV
Labour Productivity Growth Index:
To understand the trends in Labour Productivity Growth, we can construct year to

year growth rates as an index of Labour Productivity Growth Rate. Initial value of
the series is considered equal to 100 and the subsequent years Labour Productivity
Growth Rates are added to it cumulatively. This will provide us an index of Labour
Productivity Growth for the textile and garment sector for the years starting from
1995-96 to 2005-06.
B. Capital Productivity Since capital investment is given as the book value in the
ASI data, we have to estimate the capital stock in operation for every year. The
Capital stock estimation follows the procedure given below.
# Capital Stock Estimation To calculate capital stock we have used Perpetual

Inventory Method. Capital stock has been estimated from the book value of Gross
Fixed Capital compiled from the ASI Database. Fixed capital data from ASI for the
textiles and garments sector taken for the years 1995-2006. The book value of fixed
capital at 1995-96 is multiplied by Gross net ratio of capital for getting initial
year capital stock. Incremental capital during the year 1996-97 at constant prices
(deflated with the machinery and machine tools prices at 1993-94 prices) is added
to the initial year capital stock of 1995-96 for getting the capital stock for
1996-97at constant prices. Incremental capital = ((Fixed capital 1996-97 - Fixed
capital 1995-96) To calculate the capital productivity we have divided Gross Value
Added at constant prices by the estimated fixed capital. The formula used to
calculate the capital productivity is as follows: Capital Productivity= Gross Value
Added at constant prices Capital stock at constant prices
• • •
Capital Productivity Growth
CXV
Capital Productivity Growth = Capital Productivity t - Capital Productivity t-1
Capital Productivity t-1
Capital Productivity Growth Index
As in the case of Labour Productivity Growth Index, Capital Productivity Growth

Index is also constructed on a scale 100.
Gross Value Added Growth Rate =
GVAt – GVA t-1 GVA t-1
x 100
Capital Productivity Growth Index:
To make the index of Capital Productivity Growth Rate, first of all assume the
initial value of series equal to 100 then add subsequent terms of the Capital
Productivity Growth Rate cumulatively. This will give us the index value of Capital
Productivity Growth Rate.
C. Total-Factor Productivity Growth (TFPG)
Total Factor productivity Growth has been estimated using the Divisia index method.
Here, it is considered that Total Factor Productivity Growth is the result of
technical progress. Technical progress or TFPG is estimated as a residue of the
difference between output growth rates and input growth rates. . .
TFP = GVA – [WL x Labour Productivity Growth + WK x Capital Productivity Growth]
Where CXVI
WL + WK = 1 and WL = Wage Share in Total Cost WK= Capital Share in Total Cost
Total-Factor Productivity Growth Index
As in the case of Labour and capital productivity , Total Factor Productivity

Growth Index can also be constructed with the base 100 for the initial year and
adding the subsequent growth rates cumulatively to it.
CXVII

Export and Import of Leather Goods

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Export and Import of Leather Goods

Uploaded by

Copyright:

Available Formats

CONTENT

15 15 15-16 16 16-17 17-18 19-21

22 22-24 24-25 25-26 26-27 27-28 28-29 30 31 31-32 33 33 34 35-36 37-38

Annexure – 1 (Survey Questionnaire) Annexure - 2 (List of Units Contacted for the

62-71 72-74 75-77

Globalisation and Prospects for Indian Leather Sector

There continues to be acute shortage of good quality finished leather. As a result

As far as Government interface with business/private sector is concerned, about 69%

Major factors that adversely affected the competitiveness of leather manufacturing

Recommendations: # It is quite apparent that the globalization process though

# Leather producing units should be given incentives to adopt adequate pollution

# Modernization will definitely require a heavy dose of investment for which

Important aspects of the industrial structure can be categorized into product

(a) (b) (c) (d)

Leather footwear Leather footwear components Leather garments Leather goods

Mixed response is found to adoption of modern technology in the recent past. It is

2.4 Competitive Benchmarking XIX

The continuous support of the Government has resulted in massive transformation of

PRODUCTIVITY OF LEATHER & LEATHER PRODUCTS SECTOR

This chapter analyses productivity performance of organized registered

Indicators Number of Factories Number of Workers

198081 1298 97305

199091 1782 92915

200001 2378 114467

200304 2337 118154

2004-05 2293 126604

200506 2444 146704

Gross Value Added (Constant Prices 199394=100)

Value of Output (Constant Prices 1993-94=100)

3.3 Data and Variables

Period II (1990-91 to 2000-01)

Period III (2000-01 to 2005-06)

Note: Labour Productivity has been estimated as GVA/Number of Workers Source:

3.5 Labour Productivity Growth

Period II: 1990-91 to 199900 4.99

Period III: 2000-01 to 200405 3.79

1980-81 to 1989-90 -1.39

Note: Labour Productivity has been estimated as GVA/Number of workers

In the recent years, riding on domestic growth and opportunities of globalization,

Hence, in order to enhance the competitive edge of the leather industry, it is

3.6 Partial and Total Factor Productivity Analysis of Leather Industry

Note: Productivity has been estimated as GVA/Factor imput

Source: Estimated from ASI- Summary results of factory sector, CSO.

Total factor Productivity Growth Index

Index of Labour, Capital and Total Factor Productivity Growth Rates

The importance of exports in the growth of an industry cannot be underestimated in

Table 4.1: Composition of India’s Leather Exports: 1991-92 to 2007-08

414.21 23.60 243.33

461.21 23.68 238.48

301.29 13.91 161.38

328.39 12.50 179.01

306.98 10.30 212.65

344.16 10.03 266.24

7.76 105.87 3.08

1754.84 1947.61 2164.51

2625.46 2981.79 3433.30

306.02 322.18 15.71 265.88 13.65 14.88 238.1 11

342.83 245.24 17.60 238.87 12.26 11.33 277.2 12.80

98.37 227.06 5.05 10.49

100.33 158.43 5.15 7.31

376.38 29.44 1278.2

350.33 19.96 1754.84

405.21 465.35 20.80 21.49