INDIAN LEATHER INDUSTRY & ENGINEERING

HIGHLIGHTS

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Indian Leather industry is moving towards an unprecedented crisis with the slowdown of global economy. With the economies of US, Europe and Japan plummeting together, India has also witnessed fall in GDP growth from around 9% last financial year to 7% in the current financial year. It is projected to dip even further to around 5.5 % - 6% for Year 2009 - 10. The leather exports sector which witnessed a growth 20% in the first half of 2009 got dented by the global slowdown in the subsequent months. The main reason is attributed to the decline in orders from Western markets, especially the US and UK. The European Union and the US are the two biggest markets for Indian leather export firms which stand at 65% and 25% respectively in terms of India's export share of Leather products.

Leather exports
Chinese Govt. is generously helping Chinese exporters to follow an aggressive exports policy which help them to bag the orders in the competition. It is a matter of big concern for our Leather Industry which is mainly dependent upon its exports rather than domestic sales. Indian exports of leather is estimated at 3.5 billion INR and its domestic market is hovering around 2.5 billion INR. The main reason behind this could be that our leather industry cannot rely on its domestic market as the retail sector is still immature to sell the export products Leather exporters are being inextricably caught in a situation where buyers are delaying fresh orders besides delaying their payments on existing orders and on top of that they are also asking for huge discounts. It seems that if the problem is not addressed on time, it would adversely affect the small scale and tiny industries and also have an impact on big businesses, leading to job-loss and closure of units over the next few months. It is estimated that around 2-3 lakh workers can lose their jobs in leather industry which has employed around 25 lakh total workers. :

Remedies to revive leather exports

: Need of the hour is to take proactive and logical steps to tackle the situation effectively which can only happen with the matched efforts on the part of both Government and Industry. Mr. Habib Hussain (Chairman of leather exports council) while addressing the issue has suggested a three-pronged approach to tackle the situation. " He emphasized on creating the required infrastructure and have long-term plans, " Providing subsidized term loans to exporters who have suffered losses due to slow down " Treating US and Europe in focus markets scheme. " Innovative product designs at competitive rates. In addition to the above, some immediate measures are needed to alleviate the plight of the leather exporters. Govt. should increase the drawback rates, reduce delays in export incentive reimbursement, Increase duty free import limit for manufacturing exporter on the % of export value and increase weight age of leather goods under focus product scheme. All these steps are necessary to retain the big global brands which source from India which can otherwise go to China who has cost advantage to play with

Leather industry Govt Support

GOVERNMENT SUPPORT POLICIES The entire leather sector is now de-licensed and de-reserved, paving way for expansion on modern lines withstate-of-the-art machinery and equipments.

Govt Incentives
100% Foreign Direct Investment and Joint Ventures permitted through the automatic route 100% repatriation of profit and dividends, if investments made in convertible foreign currency. Only a declaration to this effect to the Reserve Bank is required. Promotion of Industrial Parks (one leather park in A.P; oneleather goods park in W.B; one footwear park in T.N. and one footwear components park in Chennai) Funding support for modernizing manufacturing facilities during Tenth Plan period 2002-07 Funding support for establishing Design Studios Duty free import of all types of raw materials Duty-free import of embellishments and components under specific scheme Concessional duty on import of specified machinery for use in Leather Sector. Duty neutralization/remission scheme in place like DEPB andDuty Drawback Liberal import-export of consumer products and components Gradual lowering of import tariff - Peak Rate 10% Simplified import-export procedures, facilitating quicker customs clearances

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ANALYSIS OF INDIA S EXPORT POTENTIAL: India s major export markets for leather handbags are USA,Germany, UK and Spain. In UK and Spain, Italy is the to exporting country of leather handbags. However, China has overtaken Italy and emerged as major exporter in markets like USA, Canada, Hong Kong and Russia. India has lot of potential in these markets, as it has unique advantage of economies of scale and capability of producing niche products .Footwear is a critical segment for the Indian leather industry asthis is expected to be the engine of growth for the Indian leathersector.

Corrective measures
REMEDIAL MEASURES There is a need to modernize the processing technology through which is possible to improve the quality of the leather this technological up gradation can minimize the problem of pollution. The shortage of raw material should be overcome somehow in order to sustain the growth in experts. In this context the treatments of splits become very important. Proper and fuller utilization of splits will have to be restored to, thereby attaining a higher recovery from the same quantum of raw material. The unutilized manufacturing capacity of the unit needs tobe harnessed in the best possible manner so that the total cost of production can be brought down. As far as financial problems are concerned; the bands and the financial institutions should come forward by providing liberal financial assistance. Specific areas of tariff Reduction in the import duty on chemical and machinery which go directly in the production of exports. Provision of export finance as well as term loans at lower rate of interest or even without interest.

Exports promotion ( engineering )

Creating an enabling environment, lowering transaction costs and upgrading port infrastructure remain the corner stone of a successful export promotion strategy and we will do everything possible to give our exporters the competitive edge," Sharma said at an event organised by the Engineering Export Promotion Council (EEPC) in Bangalore

Improving on engineering exports

The government should take steps like increasing foreign direct investment and improving infrastructure in the engineering goods sector to push up the segment''s exports vis-a-vis China. India''s engineering exports increased to only USD 41.5 billion in 2008 from USD 6.7 billion in 2001. India''s engineering exports increased to USD 3.7 billion in October from USD 2.1 billion in the same period last year, thanks to the growing demand from the US and European markets.