Hit by tariffs on products imported from China, US companies have begun shopping in India.
“US importers are panicking,” said Mecca Rafeeque Ahmed, a leading exporter and founder of the Farida group, a Chennai-based exporter of footwear.
“There is one US company which is looking to buy 50 million pairs of footwear,” said Ahmed, and added that India is short of capacity.
“The entire country exports 135 million pairs,” he said (The Council for Leather Exports puts the export figures at 115 million pairs.)
Footwear is not yet in the list of Chinese goods on which the US has slapped a tariff of 10 per cent, which could rise to 25 per cent on January 1, 2019.
Other goods, such as handbags and wallets, are in the list, but industry insiders such as P R Aqeel Ahmed, the Vice Chairman of the Council for Leather Exports, said that it is only a matter of time before President Trump tariffs leather footwear as well.
Aqeel Ahmed said that the industry is receiving more overtures from US companies for buying leather products. “We have to grab this opportunity,” he said.
The leather industry
The industry has prepared a roadmap to raise exports from $5.6 billion to $10 billion by 2021-22; the US-China trade war has come in handy for meeting the target.
According to Rafeeque Ahmed, in the footwear sub-sector, capacity is an issue, as the industry has to cater to a large domestic market. Data by the Council for Leather Exports (in December 2017) shows that the industry makes 2,065 million pairs, of which 1,950 million pairs are sold in the domestic market. This sub-sector accounts for half of India’s leather exports.
The leather garment sub-sector produces 16 million pieces a year and accounts for one-tenth of the exports. Other products such as articles (wallets, handbags), industrial gloves, harness, and saddlery account for a quarter of exports. The industry— domestic and exports, is estimated to produce $18 billion worth of products. It also employs 4.5 million people. The Indian government came up with a ₹2,600 crore ‘special package’ for the industry— the funds would be spent over three years between 2017 and 2020.
While Rafeeque Ahmed said that capacity could be a constraint in the footwear sub-sector, Aqeel Ahmed is confident that the industry would rise up to the demand. However, both of them said that other countries are moving in fast; unless India is agile, this big opportunity would be lost.
Vietnam has been aggressive, even before the US slapped tariffs on China. The country has been taking advantage of increasing production costs in China. While India aims at a target of $10 billion for the leather exports, Vietnam’s footwear exports alone in the first nine months of the current year came to $ 11.8 billion— 10.5 per cent higher than the same period last year. Cambodia too recorded a double-digit growth in the first nine months, exporting $4 billion.
Aqeel Ahmed said that Vietnam may have maxed out on its footwear capacity, and buyers would look towards India. The industry is seeking the government’s support to ramp up capacities.
Rafeeque Ahmed also said that Chinese companies are looking to join hands with Indian companies to put up factories in India, to export to the US from.
Source: The Hindu, Business Line (Published on 30th October 2018)