The Leather Industry holds a very prominent place in the Indian economy and is one of the oldest manufacturing industries in India. It provides employment to about 2.5 million people in the country and has an annual turnover of approximately USD 5,000,000.
India is one of the best destinations in the world for investing in the leather industry because it is abundant with raw materials in the form of huge population of cattle. India accounts for 21% of the world's cattle and buffalo and 11% of the world's goat and sheep population.
Apart from the easy availability of raw materials, investors are able to enjoy easy and abundant supply of skilled manpower, world-class technology, competent and favourable environmental standards, and the devoted support of allied industries.
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Leather is a durable and flexible material created via the tanning of putrescible animal rawhide and skin, primarily cattle hide.
Several leading international leather goods manufacturing brand names, such as Hugo Boss, Tommy Hilfiger, Versace, Guess, and DKNY, have invested in India and are engaged in sourcing leather goods from India.
Leather Industry in India is a mixture of both the organized and the unorganized sectors. About 75% of the leather output in India is generated by the small, cottage and artisan sectors (unorganized). Leather making dates back to pre-historic age. However, the modern method of leather production was introduced to India by the English and the French in 1857.
Traditionally, the leather industry in India produces hides and skins. However, there are also the secondary leather industries such as leather shoes, leather garments and other leather goods such as ladies' bags, gloves, travel cases, wallets, belts and desktops.
Over the years the leather industry in India has undergone drastic change from being a mere exporter of raw materials in the early 60's and 70's to now becoming an exporter of finished, value-added leather products.
The main reason behind the transformation is the several policy initiatives taken by the government of India. Indian leather industry has attained a prominent place in the Indian export and has become the top 7 industries that earn foreign exchange for the country. After the liberalization of Indian economy in 1991, the leather industry has flourished consistently in several ways and has contributed heavily to the Indian exchequer.
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The government of India in its Foreign Trade Policy for 2000–2009 has identified the leather industry as a focus sector in view of its immense potential for export growth and triggering employment generation prospects.
Investment opportunities in the leather industry lie in different segments related to the industry, which include tanning and finishing of leather products, manufacturing of leather garments, manufacturing of leather footwear and footwear parts, and manufacturing of leather goods, such as harness and saddlery amongst a host of other opportunities.
However, the footwear industry in particular holds greater potential for investments in India. India produces approximately 700 million pairs of leather footwear every year and accounts for an 18% share of the total Indian leather export. After footwear manufacturing, leather goods or products, such as wallets, travel wares, belts, and handbags offer great returns on investment.
Looking at the increasing positive statistics and the foreign direct investment, MBA graduates can make a foray into the marketing sector of the Indian leather industry in the footwear and apparels section, which is booming day by day.
The structure of the leather industry is spread in different segments, namely, tanning & finishing, footwear & footwear components, leather garments, leather goods including saddlery & harness, etc.
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Indian Leather Goods Industry: Items produced by this sector include, in addition to bags, handbags, handgloves and industrial gloves, wallets, ruck sacks, folios, brief cases, travelware, belts, sports goods, upholstery and saddlery goods. With products ranging from designer collections to personal leather accessories, this sector has a share of 20.53 per cent in the leather industry, while maintaining an average growth rate of 11 per cent recorded in the last five years.
Indian Saddlery Industry: India is one of the largest producers of saddlery and harness goods in the world. The saddlery industry was established in the 19th century primarily to cater to the needs of military and police. From then on initiatives were taken to develop, the industry and today there are over 150 units in the organised sector, out of which approximately 105 are 100% export oriented units. Kanpur, in the state of Uttar Pradesh, is a major production centre for saddlery goods in India accounting for more than 95% of the total exports of saddlery items from India. The major importers of Indian saddlery are Germany, USA, UK, France, Scandinavia, Netherlands, Japan, Australia and New Zealand.
Indian Leather Garments Industry: The Leather Garment Industry occupies a place of prominence in the Indian leather sector. The product classification of leather garments comprise of jackets, long coats, waist coats, shirts, pant/short, children garments, motorbike jackets, aprons and industrial leather garments. The major export destination of leather garments from India is Germany.
Tanning is the process of converting putrescible skin into non-putrescible leather, usually with tannin, an acidic chemical compound that prevents decomposition and often imparts colour. With tanning and finishing capacity for processing 1192 million pieces of hides and skins per annum spread over different parts of the country, most of which is organised along modern lives, the capability of India to sustain a much larger industry with its raw material resource is evident.
In order to augment the domestic raw material availability, the Government of India has allowed duty free import of hides and skins from anywhere in the world. It is an attraction for any foreign manufacturer who intends to shift his production base from a high cost location to low cost base.
There are over 2,000 tanneries in India. Many of them are scattered in small scale and cottage sector all over India especially West Bengal, Tamil Nadu, Maharashtra and Uttar Pradesh. It is anticipated that the leather industry in India will generate an estimated USD 7 billion by 2011. It is no wonder that India is one of the top exporters of leather along with France and the UK.
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The major production centres for leather and leather products are located at Chennai, Ambur, Ranipet, Vaniyambadi, Trichi, Delhi, Dindigul in Tamil Nadu, Kolkata in West Bengal, Kanpur in Uttar Pradesh, Jalandhar in Punjab, Bangalore in Karnataka and Hyderabad in Andhra Pradesh.
There exists a large raw material base in the Indian leather industry. This is on account of population of 194 million cattle, 70 million buffaloes and 95 million goats. According to the latest census, India ranks first among the major livestock holding countries in the world. In respect of 48 million sheeps, it claims the sixth position. These four species provide the basic raw material for the leather industry. The annual availability of 166 million pieces of hides and skins is the main strength of the industry.
India is the world's second largest producer of footwear; its production estimated over 700 million pairs per annum. At about USD 300 million per year, footwear accounts for 18 percent share of total exports of leather exports.
Various types of shoes produced and exported from India include dress shoes, casuals, moccasins, sports shoes, horacchis, sandals, ballerinas, and booties. Most of the modern footwear manufacturers in India are already supplying to well establish brands in Europe and USA.
Generally there are three types of leather which is sold in three forms: Full-grain leather, Corrected-grain leather and Suede.
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There are a number of processes whereby the skin of an animal can be formed into a supple, strong material commonly called Leather like Vegetable-tanned leather, Chrome-tanned leather, Aldehyde-tanned leather, Synthetic-tanned leather, Alum-tanned leather and Raw.
Today the share of the value added finished products in the total exports from leather sector are 80% as against 20% in 1970s. The top ten Indian leather exporters are: Tata International Ltd., Florind Shoes Ltd., Punihani International, Farida Shoes Ltd., Mirza Tanners Ltd., T. Abdul Wahid & Company, Hindustan Lever Ltd., Super House Leather Ltd., RSL Industries Ltd., Presidency Kid Leather Ltd and Indian Leather Footwear Industry.
Even though most of the leather and leather products from the industry in India are exported, the leather shoe manufacturers or exporters in India for instance, will import soles, insoles, shoe lasts, counters, toe puffs, polishers and stiffeners. The value of such imported items can make up to 10% to 20% of the total value of the leather goods.
India being one of the top exporters of leather is facing few challenges in the Leather Industry:
- Historically, the slaughter of cattle in India is banned in respect of the government legislation due to the animal's sacred status. Leather producers wait for the cattle to die from natural causes such as old age, starvation or diseases. Unfortunately, cattle with diseases cannot produce high quality leather.
- Cattle died from natural causes must be quickly processed to prevent decay and hide deterioration. This makes it challenging for leather producers because the dead cattle must be processed wherever the carcass is found instead of doing it within a leather production facility.
- For vegetable dyed leather, the supply of chrome salts used in leather production is limited in supply to the leather producers. When producers tried to switch to a chemical dye, PCP (Pentachlorophenol), it was eventually banned in India due to the chemical being a carcinogen.
- Apart from this effluent management, non-tariff barriers, quality specifications and cost of compliance to various standards hinder the export growth of the Indian leather industry.
However, going by the future forecast of the Indian leather industry gives ample scope to the sector to progress. With its rich resource base of raw hides, skins and human capital the industry has the capability to increase its share in global leather trade. The global leather industry is in the process of shifting its manufacturing base from developed to developing nations. This provides an opportunity for increased flow of foreign direct investment (FDI) into India.
In such a scenario, factors like abundance of leather, increasing awareness for quality, manufacturing know-how and designing capabilities all work in favour of India.
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