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India - Leather sector to benefit immensely from rising Chinese labour costs
11 February 2019

Indian leather sector wants to derisk itself from volatile market conditions and hence started looking at the US and other countries for higher exports.

Labour costs in countries such as Bangladesh, Vietnam too are much higher compared to India and it hopes to capitalise on the same in the coming months.

The domestic leather sector expects exports to shoot up sharply in the coming years owing to rising labour costs in China and other neighbouring countries.

As compared to an average labour cost of US$150 a month in India, China’s labour cost has increased over the years and now hovers around US$450 a month and hence major players, who are currently importing leather goods from China, have shifted their focus towards the Indian market to source the same, said PR Aqeel Ahmed, chairman, Council for Leather Exports (CLE), an arm of union ministry of commerce and industry.

 “Global majors like Nike are looking at increasing their presence in India to meet global needs. In fact, it is planning to add a new manufacturing factory in Tamil Nadu’s leather cluster to ramp up the production of leather goods. Similarly, other global majors, who import goods from Indian exporters have too decided to ramp up their requirements and hence we see huge opportunity going forward. CLE is working hard to achieve US$10 billion in exports by FY2020-21 as against US$5.73 billion in fiscal 2017-18,” Ahmed pointed out.

According to him, the Indian leather sector is looking at increasing exports to the US in a big way. Similarly, exporters are looking at markets such as Chile, Peru, Mexico, among other Latin American countries. In fact, we could see a 2% increase in demand from the US importers during the fiscal. The US currently imports 15% of Indian goods.

Though Europe continues to be a major importer of Indian leather goods at 55%, the Indian leather sector wants to derisk itself from volatile market conditions and hence started looking at the US and other countries for higher exports.

For the period between April and November 2018, exports grew 5.77% to Rs 26,101 crore as compared to Rs 24,677 crore in the same period last fiscal. The industry expects to end the fiscal with 10% growth. The sector employs 4.42 million people of whom nearly 30% are women, he noted. 

He further said that CLE has drawn up plans to hold at least 10 major roadshows to showcase India’s potential as well to pitch an alternate destination for China across the globe. The Council is also in constant touch with major global importers to increase their sourcing and has been receiving positive response. The industry has also decided to woo customers with new designs, products, including wallets, auto leather goods, handbags, leather garments apart from footwear, which contributes 45% of the total exports from India.

Israr Ahmed, regional chairman, CLE, said, a new MSME cluster is being planned in Vellor district of Tamil Nadu in 100 acres of land for which the state government has decided to support. CLE is in search of land bank for the same and hopes to finalise it in the next three to four months. “We have already received interests from 15 companies to set up in the proposed MSME cluster with an investment of Rs 350 to Rs 400 crore. We see the cluster expect to generate jobs for 8,000 people in and around the area,” he said adding the Tamil Nadu government has sanctioned a sum of Rs 100 crore for upgrading 13 CETPs in the state.

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