The detailed statistics on India’s leather exports for the financial year ended last March 31 are not yet available, but those that we have obtained for the 11 months through February interestingly show that two West European countries where shoe production is very intensive – Italy and Portugal – registered the highest growth rates.
Due no doubt in part to the anti-dumping duties imposed on Chinese and Vietnamese leather footwear by the European Union last year, India’s exports of leather shoes rose in every major market in Europe during the 11-month period with the exception of Denmark, where they fell by 19.1 percent to $11.86 million. Exports to Italy climbed by 52.3 percent to $118.7 million and those to Portugal jumped by 318.1 percent to $16.10 million.
The UK remained the major destination of Indian leather shoes, up by 13.2 percent to $165.95 million. It was followed closely in value by Germany, where exports of these products rose by 27.6 percent to €158.63 million. They rose by 29.5 percent to $67.15 million in France, by 14.5 percent to $41.41 million in Spain and by 45.1 percent to $39.19 million in the Netherlands, which is also a major international trading hub for the European continent.
The increase in exports to Portugal may be partly attributed to the investment made last year by Aerosoles in a large shoe factory in India, which started up last October and is set to reach an annual output of about 700,000 pairs (see Shoe Intelligence #9-9 of May 25). On the other hand, several Italian companies are known to be sourcing more and more shoes and uppers from India. Mario Pucci, an Italian industry veteran who acted for many years as export manager of Assomac, the Italian association of shoe manufacturing machinery and equipment suppliers, has been busy discussing Indian joint venture projects with many of them since the beginning of 2006, but it seems that Italian companies are hiding the new Indian connections for the moment.
The only major such initiative disclosed recently is a joint venture between an Italian company, Greaziala, and Tata International for the production of 5,000 pairs of shoes per day. Tata is India’s number one exporter of finished leather. It is second in leather garments and in third position for footwear. Europe, especially Germany, is the top destination for the company’s footwear, while China and Hong Kong buy most of its finished leather.
In addition to its joint venture with the Italian firm, Tata is planning to raise its own footwear production from 11,000 pairs per day to 21,000 with the addition of a new facility in 6-10 month’s time, making a small contribution to the Indian Council for Leather Exports’ (CLE) ambitious goal of adding 7.5 million pairs of daily capacity in the country within the next few years. The company is the leather arm of the $35 billion Tata Group, which made headlines a few months ago when its steel company, Tata Steel, acquired an Anglo-Dutch steel firm, Corus, for £6.7 billion ($12 billion). Tata Group’s leather company has an annual turnover of $130 million, about 45 percent of which comes from export markets.
Superhouse, a large Indian footwear producer run by the CLE’s current chairman, Mukhtarul Amin, is setting up two additional facilities in Agra and Kanpur, as well as a leather tannery in Unnao. Over the next year, the company, which supplies Carrefour and Metro, plans to increase its production by 50 percent to 15,000 pairs of fashion and safety footwear per day. The total investment into the shoe production will cost about $12.3 million. A new leather tannery will give the company an additional 100,000 square feet of leather per month.
Other investments are in the pipeline. In its plan for annual exports of leather and leather products to rise from $2.6 billion in 2005 to $7 billion by 2010-11, the CLE is expecting the largest contribution from the footwear sector. The CLE hopes that the footwear sector, which is currently 38 percent of India’s total leather trade, will balloon to 65 percent of the overall export of leather products and reach $4.5 billion.
This looks like a very ambitious plan, judging from the country’s recent performance in export markets. India’s total exports of leather and leather products grew by 8 percent to $2,694.6 million during the 12 months ended in March 2006. For the 11-month period from April 2006 to February 2007, they grew by 8.92 percent to $2,706.9 million, and were up by 11.64 percent in rupees. Leather footwear exports rose by 19.64 percent to $856.82 million and were up by 22.63 percent in local currencies. Total exports of leather products to all of Europe were up by 11.9 percent to $1,733.48 million, with a 27.1 percent increase for leather footwear exports to Europe climbed by 27.1 percent to $674 million.
Indian officials hope to get some leverage from an increase in the average price of exported leather products. The share taken by leather footwear in total exports of leather products is set to double from one-third to two-thirds. CLE officials are also contemplating opportunities for higher investments in women’s footwear. The current product mix in India’s shoe production is 64 percent men’s, 20 percent women’s and 16 percent children’s. Representatives of the CLE and of the Indian Shoe Federation (ISF) said that the sector is working to move more into the women’s segment, bringing the share of this more sophisticated type of products closer to the 50 percent mark.
At the India International Leather Fair (IILF) in Chennai last January, the country’s minister of state for commerce, Jairam Ramesh, argued that the footwear industry should consider moving into the low-value, high-volume segment, focusing especially on exporting children’s shoes to the USA. But this view was rejected by certain members of the ISF and of the CLE who believe a more mid-tier approach is appropriate, focusing on Europe in light of the current anti-dumping duties.
Kamalakannen Elangovan, executive director of the CLE, feels that the footwear sector must invest in new capacity and in design, and to know more about the international market, in order to achieve its goals. He uses Portugal as an example of a successful story in tapping new markets, underlining its rise to a 20 percent market share of the leather footwear segment in Scandinavia.