Need for intervention

The Union government may provide fiscal incentives to arrest falling leather exports

F I >he Union commerce ministry is thinking of granting inter­est subsidy to the domestic leather industry, in response to the industry showing a declining trend on the export front during the last few months. The ministry has circu­lated a draft note on providing ben­efits of interest subvention scheme to exporters. Under the interest sub­vention scheme, exporters get loans at lower rates. A similar scheme of 3 per cent interest subvention ended on 31 March last year. The exporters have been demanding extension of the scheme with retrospective effect from April 2014.

For the quarter ended June 2015, the industry exported leather and leather goods worth $1.57 billion (about ?9,420 crore) as against $1.65 billion (about ?9,900 crore) for the corresponding quarter last year, reg­istering a fall of around 4.86 per cent. The Indian leather sector has been experiencing a negative growth since April 2015. In the first three months, India exported leather and leather products worth $466.5 mil­lion, $532.8 million, and $572.3 million respectively, displaying a monthly fall of 4.53 per cent, 8.34


per cent and 1.51 per cent.

This sluggishness has caught the industry off-guard, as the sector was looking to maintain the momentum. Recording a positive growth of 9.37 per cent, India’s export of leather and leather products had touched an all time high of $6.5 billion for 2014-15, as against $5.9 billion in 2013-14. Fall in euro, economic con­ditions in European nations, and economic sanctions imposed by the European Union against exports of goods to Russia have been cited as the primary reasons for this set­back. Russia imports a significant amount of leather, which is sub­sequently exported to the EU in finished forms.

“The EU market, where we export over 65 per cent of our exports, have shown deterioration due to macro- economic headwinds. To arrest this adverse impact, the industry is des­perately looking for some relief, and a scheme like interest subvention will definitely make a difference,” says M. Rafeeque Ahmed, chair­man, Council for Leather Exports (CLE), who believes that the govern­ment’s timely interventions can to a great extent offset this ongoing

However, he views that a lot will depend upon how the EU market performs going ahead. According to the CLE chairman, the US market, though relatively small, with about 13 per cent share, is showing a sign of revival. Moreover, the council has recently initiated a concerted effort to scale up the exports to the US. There are moves to evaluate some of the newer markets as well.

“With all these measures in place, we should be in a position to negate some of the ongoing adversities and, consequently, we project that we would at least match last year’s per­formance, being flat on growth,” adds Ahmed. Even as exports have been impacted of late, there has been significant improvement otherwise, if the overall performance is gauged in the longer term. Exports from the leather sector have almost doubled from $3.4 billion in 2009-10.

Most importantly, from a mere raw material supplier, India’s export basket currently comprises almost 50 per cent value-added products. Export of different categories of foot­wear holds a major share of about 45 per cent, followed by leather goods and accessories with a share of 22 per cent, finished leather 21 per cent and leather garments 9 per cent. In fact, today, almost 50 per cent of India’s leather business comes from inter­national trade. The major markets for Indian leather products are Ger­many, the US, the UK, Italy, France, Hong Kong, Spain, the Netherlands and the UAE.

Great job provider The Indian leather industry is not only a major foreign exchange earner for the coun­try, but one of the largest employ­ment providers. According to a study by the National Skill Development Corporation and growth projec­tions of the CLE, the leather indus­try is expected to employ about 7.1 million people by 2022. At present, the sector employs around 2.7 mil­lion people.

However, one of the major prob­lems confronting the leather industry is the shortage of skilled manpower. In order to overcome this gap, the

Union government established the National Skill Development Corpo­ration which, in turn, has approved formation of Leather Sector Skill Council under the aegis of CLE in 2012. Leather SSC has been facilitat­ing the development of skill solutions for industry players in acquiring and developing the requisite skilled man­power. It co-ordinates with indus­try, education and training providers and government in ensuring capac­ity building for availability of trained and skilled manpower across indus­try segments.

♦ ARBIND GUPTA [email protected]

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