With 17.62% of bovine animals, 5.6% of sheep and lambs and 14.85% of goats and kids in the world, India has a large raw material base for leather industry. Having export earnings of about $4 billion, it is the eighth largest foreign exchange earner. It is also a major employer of the less privileged, about 2.5 million, in rural areas. These fundamentals have made it a ?focus sector? for generating more jobs and fostering further growth. However, the industry is facing hard times owing to the global meltdown and low demand for leather products in the international markets. Council for Leather Exports (CLE) chairman Habib Hussain spoke to FE?s Joseph Vackayil about the role, relevance, challenges of the leather industry and the various development actions under way to take the industry to newer and sustainable heights. Excerpts:

What is the significance of the leather industry to the national economy?

The leather industry is the largest foreign exchange earner in the country. From a mere exporter of raw materials in the 1970s, value-added finished products now have a share of about 80% in the total export of leather. Exports increased from $1875.21 million in 2002-03 to $3,477.52 million in 2007-08. Recognising its potential, the Centre has identified the industry as ?focus sector? for generating employment and fostering further growth. Now, it is employing over 2.5 million people, mostly from the weaker sections of the society. Over 30% of them are women. It has the potential to provide jobs for another one million people, may be in the next five years.

What is the impact of global crisis on the industry?

Like other export industries, the leather sector also is facing the brunt of the global meltdown. Our hopes to hit $4 billion in exports by March 2009, was dashed. It may be around $3.54 billion. Available data with CLE shows that the fall in the first three months of 2009, when compared to the figures of 2008, is alarming. Exports in January 2009, is $288.27 million as compared to $340.93 million in 2008, in February it was $235.72 million to $ 316.48 million and in March 2009 $202.69 million to $ 296.08 million. But this is not the end. The spree of cancellation and cut in export orders are continuing. At the same time the Chinese are aggressively booking orders at highly discounted rates. We fear a very bad year ahead and exports may fall further affecting production and employment.

In these difficult times what role CLE plays to support the industry?

CLE is rendering multiple services to its members to extend their global reach. The council also facilitates importers anywhere in the world in their sourcing needs.

The council has played a significant role in the overall growth and development of the Indian leather industry, since its inception in 1984. We are now in the Sliver Jubilee year and at this juncture the council rededicates itself to strive for the overall growth and development of the country?s leather sector. The council also informs the government the problems and demands of the sector and also strives to provide a level-playing field to the exporters.

With the problems in the international markets, what is the reach of the leather industry in the domestic market?

It is estimated that the total production of leather and leather production in the country is about $7 billion. Interestingly, 95% of the footwear production in the country is sold in the domestic market and only 5% is exported. This is because the major share of the footwear sold locally is in the low price range. With the growing affluence of the consumers, more and more people are now opting for branded footwear and this trend will increase in the coming years. As per a study undertaken by the council, the domestic market for leather and leather products in the country is projected to increase from $3,445 million in 2006-07 to $5,820 million in 2014-15 providing a growth rate of 6% per annum.

Are imports a threat to domestic leather industry?

As per statistics of Directorate General of Commercial Intelligence and Statistics (DGCI&S), the import of leather and leather products has increased from Rs 1,229 crore during 2003-04 to Rs 2,485 crore during 2007-08.

However, during 2007-08, the import of leathers, which are basic raw materials required for the leather industry, constituted about 54.5% of total import of leather and leather products. The increased import of leathers may not pose a threat to the domestic industry as the requirement of leathers is on the increase. The import of value added leather products is not that high at present.

What is the distinctive advantage of Indian leather products in the international markets?

The Indian leather industry is wedged between two countries with entirely different focuses, China on volume and Italy on high creativity. Thus, the industry is in between and ideally suited to gain market share from both. India exports leather products to some of the finest brand names in the world. Our strength lies in creativity, ability to do short runs and shorter turnarounds.

Having declared as a focus sector, are there any government-supported development programmes for the industry?

The commerce and industry ministry has been implementing the Indian Leather Development Programme (ILDP) with an outlay of Rs 400 crore in the 10th Plan and Rs 912.67 crore in the 11th Plan period. Its thrust was modernisation and expansion of capacities, human resource development, support to rural artisans for design and product development, creating market linkages, addressing environmental concerns in the tanning sector, promotion of ventures/technology tie-ups and direct investments etc.

The IDLS scheme also envisages growth of leather parks in the country. A footwear component park with state-of-the-art design complex facility has been initiated near Chennai. A leather goods park is coming up in Kolkata. The Centre is considering promotion of similar parks for the leather sector.

The leather industry is said to be highly polluting. How does the industry tackle this issue?

The production units in leather sector are connected to the ETPs/CETPs so as to meet the environmental compliance. The objective of the industry is to achieve zero liquid norms for which the industry requires the help and financial assistance of the government.