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Leather sector trapped in quagmire of troubles

30
Dec '08

The booming leather industry in India is going through a difficult phase due to the ongoing recessionary trends prevailing in the global markets. To make matters worse, the industry in India is also facing stiff competition from its Asian neighbours like China and Vietnam.

The slowdown in the global markets, rising production costs and the credit crunch are creating a sense of insecurity among the leather exporting community. To top it all, they are also not able to upgrade their machinery to compete with other Asian countries due to the prohibitively high interest cost.

According to sources, Kanpur which is the hub of leather manufacturing in the country, has been affected the most. Most of the small units which used to process orders on behalf of the exporters have either shut down or are operating at low capacities and in the process creating unemployment in the industry.

The biggest stumbling block in the global markets according to experts is that the Chinese government is paying up to nearly 14 percent in export subsidies to its leather exporters compared to 8 percent in India. China also has a competitive advantage in producing large volumes at low prices.

According to experts, the Indian leather industry is perfectly capable of manufacturing quality leather and goods, but is not able to take advantage of the fact due to constraints in technology, shortage of skilled labour and more so because of a fragmented industry base which is made up of small and medium size units.

The experts cite the high prices of fuel in the Indian market as a cause of concern for the industry. Despite prices of crude falling to four year lows, the prices of fuel in the Indian markets are yet to be lowered which in turn adds to production costs and in turn makes the exporters un-competitive in global markets.

The leather industry as a whole provides employment to nearly 2.5 million people in India and is also one of the biggest foreign exchange earners in the country. Experts aver that if the government does not intervene in the development of the sector it could lead to severe repercussions and large scale unemployment.

Fibre2fashion News Desk - India

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