The leather industry has huge potential in India.

The footwear segment, for instance, is

poised to grow manifold with the rise in disposable income of the middle class, as will
the demand for leather goods.
Export prospects have also brightened considerably, especially since Chinas leather
exports have been stagnating and production has fallen in Western Europe.
The industry has set a trade target of US$ 12 billion by 2012, including exports
worth US$ 7 billion and domestic sales worth US$ 5 billion.
According to a 2006 estimate, the leather industry employed directly and
indirectly around 2.5 million people, and is expected to create another 1 million
jobs by 2010. The primary sector - hide/skin collection, tanning, finished leather
and finished products - employs almost 92 per cent of personnel as opposed to
the 8 per cent jointly employed by the secondary and tertiary sectors.
During Aril-December 2007, exports of leather and leather items touched US$
2485.58 million as opposed to US$ 2258.81 million during the same period in
2006, registering a growth of 10.04 percent, according to the Council for Leather
Exports (CLE) estimates.
During April-November of 2007-08, leather footwear exports grew by 18.72 per
cent to US$ 696.10 million from US$ 586.32 million. During the same period,
exports of footwear components increased by 29.10 per cent from US$ 142.54
million to US$ 184.01 million.
India is expected to export leather and leather goods worth US$ 7 billion by the
year 2010-11, according to Mr Kamal Nath, Commerce & Industry Minister.
However, to meet this target, the industry must create additional capacity and
maintain an annual growth rate of 20 per cent.
Some of the constraints slowing down the progress of this industry are lack of
FDI the industry accounted for a meagre 0.15 per cent of the total FDI inflow in
2006; lack of technical expertise and competition from the Chinese leather
industry.
In recent times, the unprecedented appreciation of the Indian rupee against the
US dollar has put the sector under tremendous strain. This has slowed down
investments and led to a loss in employment.
The industry has also been dogged by environmental issues. In the leather
tanning and finishing stages, various chemicals that are used are polluting and
have been banned by some importing counties, thereby adversely affecting
exports to those countries.
Policy Initiatives
Recognising the potential of the leather industry and keen to take the industrys share to
4 per cent of the world trade by 2010, the Government of India has taken certain policy
initiatives.
Foreign equity up to 100 per cent is allowed, subject to certain conditions.
Foreign equity up to 51per cent is accorded automatic approval in several key
areas.
Investments over 51per cent equity participation are approved on a case-to-
case basis by the Foreign Investment Promotion Board (FIPB). Clearance of
proposals by the FIPB takes around six weeks on an average.
Foreign investors need not have a local partner.
Free repatriation of profits and capital investment is permitted, except for a
shortlist of specified consumer goods industries
Apart from these steps, the Union government commissioned a Tannery Modernisation
Scheme in 2006 and another scheme for footwear and leather products. The scheme is
expected to be implemented at a cost of US$ 71.21 million. The government is also
encouraging the setting up of footwear parks/complexes to enhance production
capacity. During the 10th Plan, the government provided financial assistance to build a
Footwear Component Park and a Footwear Complex at Chennai, and provided
marketing and training assistance to artisans and primary workers. The government
also proposes to build a footwear park, a tanning complex, a leather goods park and
two footwear component parks for the leather industry, all by 2010.