Rupee rise hits leather exports

Down 2.6% in the first half of FY08, putting financial burden on exporters.

Rupee appreciation has proved to be a bane for leather exports, with the sector grappling with low margins. Exports of leather and leather products declined 2.61 per cent in rupee terms during the first six months of financial year 2008. However, they increased 9.40 per cent in dollar terms.

The appreciation has been eating up export margins and causing an immense financial burden on the exporting community, said Mukhtarul Amin, chairman of the Council for Leather Exports, the apex council under the Ministry of Commerce for development of the industry.

For the six-month period ended September 30, 2007, leather exports stood at $1.7 billion as against $1.5 billion in the corresponding period a year ago. In rupee terms, leather exports declined to Rs 6,787.75 crore from Rs 6,969.83 crore during the first six months of the previous financial year.

Footwear, a key driver of exports, accounted for 43.29 per cent of India's total leather exports. 
 

MARGIN BLUES Export performance during April-September (In Rs crore)
Product	2006	2007	% change
Finished leather	1,647.50	1,481.51	-10.08
Leather footwear	2,103.98	2,245.47	6.72
Footwear components	503.85	578.26	14.77
Leather garments	773.53	707.60	-8.52
Leather goods	1,641.64	1,452.16	-11.54
Saddlery & harness	177.13	208.08	17.47
Non-leather footwear	122.20	114.66	-6.16
Total	6,969.83	6,787.75	-2.61
Source: CLE

Footwear exports (leather, footwear components and non-leather footwear) registered 20.90 per cent growth at $718.79 million during April-September 2007 in comparison with $594.51 million.

The total installed capacity of the footwear industry is forecasted to touch one million pairs a day over the next four to five years from the present total installed capacity of 250,000 pairs a day. Footwear exports are expected to go up to 300 million pairs in another five years from 100 million pairs, thanks to big investments from Taiwan.

India and China are the two leading producers of footwear in the global footwear market, jointly accounting for over 70 per cent of the total global footwear production, while China and Hong Kong are the top two footwear exporters.

Finished leather exports were up 1.01 per cent per cent to $362.41 million from $358.77 million a year earlier. In rupee terms, they declined 10.08 per cent to Rs 1,481.51 crore (from Rs 1,647.50 crore).

The major export markets for Indian leather products are Germany, Italy, Hong Kong, Spain, France, Netherlands, Australia and the US, UK and UAE.

These 10 countries have accounted for about 75.77 per cent of India's total leather exports in the first six months of financial year 2008. Positive growth is expected in Germany, UK, Italy, France, Netherlands, Australia and Denmark in the coming years.

"Though Europe accounts for about 64 per cent of India's leather exporters, most of the customers are still billing in dollars. We are trying to convert the billings into euros," Amin said.

In terms of regional growth, the south continues to dominate with 42.16 per cent share in total exports.

The region posted 9.86 per cent growth in exports at $700.05 million as against $637.22 million during April-September 2006.

While all regions reported postive growth, exports from the northern region declined 3.97 per cent.

Total exports in FY08 are forecast to touch $3.3 billion. In FY07, exports grew 8.33 per cent to $2.98 billion.