After reporting zero or marginal growth over the past two years, the leather industry - comprising thousands of small and medium enterprises (SMEs) - expects to close the current fiscal year with 15 per cent export growth.
It attributes the recovery to discovery of new markets following the adoption of a de-risking strategy, and the diversion of orders from China to India as a result of China's ballooning manufacturing costs.
M Rafeeque Ahmed, president of the All India Skin and Hide Tanners and Merchants Association, said he expects exports of leather and leather products to reach $5.75 billion in 2013-14.
The industry, which is among India's top 10 foreign exchange earners, reported 21 per cent export growth in 2010-11. The year 2011-12 saw no growth, while 2012-13 saw three per cent growth, to some $5 billion. "Now things are looking good and we will close this fiscal with around 15 per cent growth," said Ahmed.
Though traditional markets such as Germany, Italy, Spain and Russia have declined by more than 10 per cent, the US and Denmark have reported an increase of around 20 per cent, with UK coming next with 10 per cent, he added.
The industry is looking at the Far East and African and South American countries for a big export push, as those countries have great potential, said Ahmed. The domestic market is also encouraging and entrepreneurs are paying more attention to it, he added.
Indian exporters have also benefitted from rising production costs in China, owing to wage increases. If a pair of shoes is manufactured for $20 in India, the cost in China is around $21.5, according to Ahmed.
"Some cities in China, which traditionally housed the leather industry, are now moving towards electronics. Orders are now moving towards India, which is good news, but the challenge is to expand production capacity and improve quality," he said. Five years ago, India's quality was superior to China's, but then China invested heavily in quality, he said.
A Srinivasan, a leading exporter from Chennai, notes that labour costs have risen in Tamil Nadu too, and availability of power is also a problem. In Ranipet, Ambur and Vellore - the state's major leather clusters - unscheduled power cuts last as long as four to five hours. These push up power costs, since units have to be run on diesel generators.
Some units in Tamil Nadu - which accounts for 40-45 per cent of India's leather industry - are now looking at other states such as Andhra Pradesh and West Bengal for future expansion. Workers are more easily available in Andhra Pradesh and West Bengal, and at lower salaries, said Ahmed.
Workers' salaries, which used to be around Rs 5,000 a month, have increased to Rs 7,000-8,000, while billing costs have not increased to the same extent. "We are ready to pay such salaries also, but are still not able to get workers," said Bashir, who does contract work for big leather companies in and around Ambur.
The depreciation of the rupee against the US dollar and the British pound (UK and the US are key markets) may have benefited a few exporters for a short period, but it is an ominous sign, Ahmed said, because it will make imported raw materials - on which the Indian leather industry is heavily dependent - more expensive.
Raw material shortage is also a continuing problem, as large quantities of semi-finished leather are exported to China and Italy. The Union government recently decided to accept the view of the Council for Leather Exports that certification by the Central Leather Research Institute be made mandatory for leather exports, so that they conform to the government's regulatory policies. Ahmed hopes this will prevent clandestine exports of raw hides skins, and more will be available to local tanneries.
