PROJECT REPORT

On

“A STUDY ON THE INDIAN LEATHER EXPORTS TO NORTH AMERICA”

Submitted to :MRS. SHWETA WADHWA

(Programme Lecturer)

Submitted by :PARITOSH BERRY

BBA – H6BRoll No. : 42

JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL

Kalkaji, New Delhi

ABSTRACT

The topic chosen for the current Thesis study is “A study of leather exports from India to

North America”. The following study is based on a strong assumption that “India is one

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of the major exporters of leather and leather goods to North-American countries”. This

Hypothesis is based on an excerpt from the study conducted in US Embassy to India’s on

the bilateral trade patterns.

Nature of Study

The Thesis study in subject now is an exploratory study with a touch of descriptive

research. Fundamentally it is a Primary Data Study.

Mode of data collection

Questionnaires & Internet is the only source for obtaining the data for this Thesis.

However for converting the data into the usable format and context MS Word and MS

Excel have been extensively used.

Analytical tools used

Simple Percentages and growth rates have been used as a part of

Mathematical tools.

Using statistical tools like GAP, the complex data has been tabulated and

drawn into charts and analyzed subsequently.

As a part of business tools, SWOT analysis has been adopted.

Theoretical Orientation

The study must include all the basic knowledge about the industry and Economies

involved in the study. For this purpose, an extensive understanding of the different

aspects of links involved in the whole value chain of the study had to be carried out. Once

the reader felt the gasp of the topic and nitty-gritty’s involved, I have introduced him to

various combination of the quantitative data relevant to the topic.

Outcomes

The above dealt tools are sure to establish clear-cut relationship between the missing

information obtained from the secondary research. The outcome necessary for

establishing the conclusion and to prove the hypothesis would be from the quantitative

information.

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Limitations of the Research

For the sake of better understanding and analysis, North America has been

defined as USA and Canadian markets only.

The data quoted in this report is considered to be latest, since the available

sources are not uniform and not as often updated.

No future projections for the Industry have been made, since such

projections are subjected to a lot of intricate factors of the Industry. And it is not possible

to deal with so many factors in a small study like this.

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ACKNOWLEDGEMENTS

I would like to convey my gratitude to Mrs. Shweta Wadhwa for her kind support and

insightful guidance at every step of this Thesis Writing, without whom this work would

not have seen the light of the day. He has been of great inspiration and support for me at

every turn of the process.

Further I would like to thank and credit all my professors at JIMS with the success of

this work, which is an offshoot of the seeds of knowledge sown by them. Most

Importantly, I would like to thank Mr. Anoop Sethi for their invaluable suggestions in

this work and for having guided me to the right path at the right time.

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TABLE OF CONTENTS

INTRODUCTION TO THE TOPIC

1. About the Leather Industry ………………………………………………....... 2

1.1.1 Introduction to Leather Crafts in India ………………….……………3

2. India – Snapshot of the Economy and Infrastructure…………………...….…4

2.1 Economic Overview………………………………………….………..…42.2 Infrastructure…………………………………………………….……....52.3 Indian Ports……………………………………………………………....6

3. Organizational Setup for Promoting Exports in India…………………..…….83.1 ITPO…………………………………………………………………..…..83.2 Fairs in India………………………………………………………..…....93.3 Fairs Aboard…………………………………………………...……........9

4. Trade Initiatives with North America……………………………………....…114.1 Trade with North NAFTA……………………………………..……….114.2 Measures Undertaken for Export Promotion to NAFTA……..…......15

5. Current Status of Leather Exports from India………………….……..…..…165.1 About Council for Leather Exports (CLE)………………………...…175.2 Global Leather Industry………………………………………….……185.3 Forms of the Leather Exported…………………………………….....195.4 Export Duty Chargeable on the Indian Leather Goods…………..….225.5 Global Exports vis-à-vis India's Export…………………………...…..23

6. USA – Country Profile……………………………………………………...…..256.1 Economic Overview…………………………………………….........…256.2 Trade Policy Developments…………………………………………….276.3 INDO-US Leather Trade…………………………………………….…306.4 Government of India’s Initiatives……………………………….....

…..31

7. Canada – Country Profile………………………………………………...……327.1 About the Country………………………………………...………..…..327.2 Economic Overview……………………………………………….……327.3 Trade Policy………………………………………………...………..….33

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METHODOLOGY .............................................................................................35

ANALYSIS

8. Supply Side Analysis……………………………………………………………378.1 Quick Facts About the Indian Leather Market……………….……...378.2 Market Size……………………………………………………………...398.3 Performance of Leather Exports in the Past……………………...…..408.4 Trade with North America………………………………………....…..438.5 Competitive Scenario………………………………………………..….448.6 Exports Promotion Measure for Leather Industry in India………....46

9. Demand Side Analysis……………………………………………………….....479.1 North America’s Total Leather Imports………………………….…..479.2 US Trade Policy on Footwear and Leather Products…………...……50

GAP ANALYSIS

10. Demand – Supply Gap………………………………………………………….5110.1 Calculation of the Net Imports of the North America………………..5110.2 Calculation of Net Exports from India to North America…………...5110.3 Demand -Supply Gap for Leather Trade with the USA………….….5110.4 Demand -Supply Gap for Leather Trade with Canada…………...…5210.5 Demand -Supply Gap for Indian Leather Trade with North………..52

SWOT ANALYSIS

11. Strengths and Weaknesses for Indian Leather Industry…………………….5411.1 Strengths………………………………………………………………..5411.2 Weaknesses………………………………………………………….….56

12. Opportunities and Threats in the Global Leather Industry……………………..5712.1 Opportunities…………………………………………………..……….5712.2 Threats…………………………………………………………..………5912.3 Major Competitors …………………………………………………….61

RECOMMENDATIONS ………………………………………………………62

CONCLUSION ………………………………………………………….……..63

BIBLIOGRAPHY ………………………………………………………….…..65

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LIST OF TABLES

i. Types of Leather and Their Application……………………………………… 3ii. Economic Indicators of India………………………………………………..….5iii. Snapshot of Indian Infrastructure …………………………………………..…5iv. India’s Export and Import to/from the US……………………………...……11v. India’s Export and Import to/from Canada…………………………………..13vi. Export Duty Charged on Indian Leather goods………………………...……22vii. Economic Indicators of United States……………………………………..…..27viii. Economic Indicators of Canada in 2006………………………………………33ix. Sources of Production of Leather……………………………………….……..37x. Category-wise leather producing Firms………………………………………39xi. Leather Production by Category…………………………………………..…..39xii. Value of Indian Leather Products Exported During 2005 – 06……………...40xiii. Destinations Including Canada for Indian Leather exports………………....41xiv. Leather Imports by India…………………………………………………...….42xv. Exports of Broad Categories of Leather …………………………………...…43xvi. Top 10 Exporters of Leather as a Share of the World’s Exports…………....44xvii. Top 10 Exporters of Leather as a Share of the World’s Imports…………....44xviii. India’s Share in the World-wide Leather Imports…………………………...45xix. Value of the Leather Apparel Imported by the US in the Recent Past……...47xx. Imports of Leather by the North America in the Recent Past……………….48xxi. Value of the Leather Apparel Imports by Canada in the Recent Past…...…48xxii. Value of the Leather Imports by the US in the Recent Past…………………49xxiii. Value of the Leather Imports by Canada in the Recent Past……………..…49xxiv. Net Imports of Leather Products in North America……………………..…..51xxv. Net Imports of Leather Products in North America…………………………51

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LIST OF FIGURES

I. Important Hubs for Leather Production in India……………………………38

II. Breakup of Total Indian Leather Exports in 2005 – 06………………….….40III. Value of Leather and Leather Products Exported During 1999 –

2005….…41IV. Demand-Supply Gap with

USA………………………………………………..52V. Demand-Supply Gap with Canada………………………………….

……..….53VI. Demand-Supply Gap with North

America…………………………………....54

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PREFACE

This Thesis report is motivated to study one of the emerging topics of the Indian Foreign

Trade. The topic chosen for the current Thesis study is “A study of leather exports from

India to North America”.

The nascent motive in studying this particular topic is to investigate the rapidly changing

conditions in the Foreign Trade Environment and the promises that it has in store for the

Emerging Economies like India.

The present study is based on a strong assumption that “India is one of the major

exporters of leather and leather goods to North-American countries”. This Hypothesis is

based on an excerpt from the study conducted in US Embassy to India’s on the bilateral

trade patterns. The referred article observes that India’s major exports to US include

gems and jewellery, textiles, coir, jute and handicrafts, chemicals and allied products,

engineering goods, leather and leather manufactures, etc.

The Hypothesis could be proved with the help of a thorough probe into the leather trade

trends in the past both at the Exporter’s and Importer’s end. We will try to identify the

Gap in the foreign trade trends between India and North America. We will plug the Gap

with the help of some judicious analytical tools. The resulting trend would give us a clear

picture about the actual scenario of the Leather Trade trends between India and North

America.

Here for this study purpose I have considered the USA and Canada as the whole North

American market.

INTRODUCTION TO TOPIC

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1. About the Leather Industry

Leather

Leather is the suitable forms of Animal skins and hides. These skins and hides are treated

to preserve them. Tanning converts the otherwise perishable skin to a stable and non-

decaying material. Though the skins of animals such as ostrich, lizard, eel, and kangaroo

have been used, the more common leathers come from cattle, including calf and ox;

sheep and lamb; goat and kid; horse, mule, and zebra; buffalo; pig and hog; and seal,

walrus, whale, and alligator. Leather making is an ancient art that has been practiced for

more than 7,000 years

Tanning

By the term ‘Tanning’, one might get confused with a term used for tanning of fair skin

into dusky. The tanning of fair skin in humans by sunlight is completely different:

ultraviolet light causes production and redistribution of the pigment melanin in epidermal

cells.

In case of Leather industry it is the process through which raw animal hides or skins are

chemically treated to convert them into leather. Vegetable tanning (using bark, wood,

roots, or berries) has been practiced since prehistoric times. After removal of hair, flesh,

or fat, a tanning agent displaces water from the interstices between the protein (mostly

collagen) fibers in the skin and cements the fibers together. The agents most widely used

are vegetable tannin, salts such as chromium sulfate, and fish or animal oil.

Types of Leather

i. Types of Leather and Their ApplicationTypes of Leather Application/Nature

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Full-Grain leather Furniture and Foot-wearCorrected-Grain leather Leather garments of inferior qualitySuede Processed hide known as LatigoPatent leather Plastic coated leatherShagreen Un-tanned leather from horse’s backBuckskin Imperishable leatherBelting leather Used in Luxury products like briefcases, portfolios,

and walletsNapa leather Used in higher quality wallets, toiletry kits, and

other personal leather goods

Source: www.answeRScom

1.1 Introduction to Leather Crafts in India

Rajasthan

The Rajasthan state has a long history in leather craft and industry and leather shoes

known as ‘jootis’ or ‘mojdis’ (shoes decorated with beautiful embroidery) are made in

Jaipur and Jodhpur. Embroidery known as ‘kashida’ is done on the jootis. This

embroidery is mainly done by the women, who also do a bit of fancy stitching or

appliqué work to give a designer look to the shoes that have neither a left nor a right foot.

Leather is also used for bookbinding and Alwar is well reputed for this craft that

flourished in the 19th century under Maharaja Banni Singh. Bikaner is again famous for

its kupis or camel-hide water bottles.

Delhi

The current Indian capital Delhi was also an important centre of leatherwork during the

Mughal period, Traditional leather jootis and slippers, which were sometimes ornamented

with pearls, gold and silver were the piece de resistance. Embroidered bags, shoes were

other popular items.

2. India – Snapshot of the Economy and Infrastructure

2.1 Economic Overview

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The economy of India is the fourth largest in the world as measured by purchasing power

parity (PPP), with a GDP of US D3.63 trillion. When measured in USD exchange-rate

terms, it is the twelfth largest in the world, with a GDP of USD785.47 billion or Rs 35,

34,615 0 million in 2005. India is the second fastest growing major economy in the

world, with a GDP growth rate of 9.1percent, as of the first quarter of 2006. India's per

capita income (PPP) of USD 3,400 is ranked 122nd in the world.

For most of its independent history, India adhered to a quasi-socialist approach, with

strict government control over private sector participation, foreign trade, and foreign

direct investment. Starting from 1991, India has gradually opened up its markets through

economic reforms by reducing government controls on foreign trade and investment.

Privatisation of public-owned industries and some sectors to private and foreign players

has continued amid political debate.

India has a labour force of 496.4 million of which 60percent is employed in agriculture or

agriculture-related industries, 17percent in mainstream industry and 23percent in service

industries. India's agricultural produce includes rice, wheat, oilseed, cotton, jute, tea,

sugarcane, potatoes. Major industries include textiles, chemicals, food processing, steel,

transportation equipment, cement, mining, petroleum and machinery.

ii. Economic Indicators of India Indicator FY 2005 -06 Percent growth

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Value in million USD

Service sector growth-

9.8

Domestic and International air traffic growth -

36.3 *

Domestic and International air cargo traffic growth

- 17.5*

Growth in merchandise exports-

29.2 *

GDP at factor cost at current prices 72,316.3 12.5

Agriculture and allied sectors 114,937.8 2.3Food grains production (tones) 209.3 2.3Index of industrial production 215.4 7.8Electricity generated (kwh) 458,600 4.7Wholesale price index(on February 4, 2006)

196.24.1

Money supply (Outstanding at the end of financial year)

576700.5 16.4

Imports at current prices (April-Jan 2005-06)

108,80326.7

Exports at current prices (April-Jan 2005-06)

74,97818.9

Foreign currency assets (by end January 2006)

133,7708.2

Exchange rate (Re/USD)(Average April-January 2005-06)

44.25 2.1

(* Estimated figure)Source: http://www.ibef.org

2.2 Infrastructure

iii. Snapshot of Indian Infrastructure in the Recent Past

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Indian Roads

Railway Network (1998-99)

Air traffic at Major Airports

Source: http://civilaviation.nic.in/ ; http://www.indiacore.com

2.3 Indian Ports

Indian Ports are the gateways to India's international trade by sea and are handling over

90percent of foreign trade.

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PeriodNational Highways total length (in km)

Widening to Two Lanes

Widening to Four Lanes

Major bridges

2002- 03 58,112 710 418 142003- 04 65,569 671 799 172004- 05 65,569 221 841 1

Gauge Route (km) Running Track (km) Total Track (km)

Broad 44,220 62,180 1,06,400Meter 15,180 15,880 31,060Narrow 3,410 3,450 6,860

Name of the City Services Percentage of total trafficMumbai International and Domestic 30.3Delhi International and Domestic 21.8Chennai International and Domestic 9.2Calcutta International and Domestic 7.1Bangalore International and Domestic 5.1Hyderabad Limited International and

Domestic3.55

Thiruvananthapuram International and Domestic 3Ahmedabad Limited International and

Domestic2.1

Goa Limited International and Domestic

2

Calicut Limited International and Domestic

1.4

The 6,000 km long Indian coastline has 12 major ports and 181 minor/ intermediate ports

out of which 139 are operable. The major ports are located at Calcutta/ Haldia, Chennai,

Cochin, Ennore, Jawaharlal Nehru Port at Nhava Sheva, Kandla, Mormugao, Mumbai,

New Mangalore, Paradip, Tuticorin and Vishakhapatnam.

The 12 major Indian ports handle 90 percent of the all-India port throughput. The 139

minor ports are under the jurisdiction of the respective State Governments. During 2001-

2002, the total cargo handled at major ports was 287.56 million tones as against 281.10

million tones during 2000- 2001.

Though the bulk of Indian trade is carried by sea routes, the existing port infrastructure is

insufficient to handle trade flows effectively. The current capacity at major ports is

overstretched. The major ports together have a capacity of 215 million metric tones

(MMT) at 1997- 98 levels. The major ports handled 287.56 million tones in 2001- 2002.

The situation of limited capacity and high demand has inevitably resulted in port

congestion.

Problem Areas

The performance of Indian ports does not compare favorably with that of efficient

international ports. On three important parameters- capacity, productivity and efficiency,

Indian ports lack in comparison to some of the major international ports. In international

terms, labor and equipment productivity levels are still very low due to the outdated

equipment, poor training, low equipment handling levels by labor, uneconomic labor

practices, idle time at berth, time loss at shift change and high mining scales and low

datums.

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3. Organizational Setup for Promoting Exports in India

3.1 INDIA TRADE PROMOTION ORGANISATION (ITPO)

The Trade Fair Authority of India (TFAI) was incorporated under Section 25 of the

Companies Act, 1956, on 30th December 1976, and commenced business with effect from

1st March 1977. Subsequently, the Trade Development Authority, a society, registered

under the administrative control of Ministry of Commerce & Industry, was merged with

the TFAI with effect from 1st January 1992 and the newly formed Company was renamed

as India Trade Promotion Organization.

To strive to be the pre-eminent trade promotion organization of India and as such to

promote, facilitate, encourage and coordinate various activities and programmes which

would enhance India’s share in international trade and contribute in maximizing the

country’s foreign exchange earnings through the instrument of trade in goods and

services.

Objectives

To promote, organize and participate in industrial trade and other fairs and

exhibitions show-rooms and depots in India and abroad and to take all measures

incidental thereto for boosting up country’s trade.

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To publicize in India and abroad International Trade Fair and Exhibitions to be

held in India and invite the foreign participants to participate in them.

To organize and undertake trade in commodities connected with relating to such

fairs, exhibitions show-rooms and depots in India and abroad and to undertake the

purchase, sale, storing and transport of such commodities in India or any where else in

the world.

To undertake promotion of exports and to explore new markets for traditional

items of export and development exports of new items of export and development exports

of new items with a view to maintaining, diversifying and expanding the export trade.

3.2 Fairs in India

ITPO’s domestic exhibitions mirror the latest developments in various sectors of the

Indian industry. These events provide opportunity to the Indian manufacturers/ exporters

to promote their export and also launching and test marketing of their new products and

services. During 2005-06, ITPO’s calendar of exhibitions consist of 23 exhibitions

including IITF’ 2005, India International Leather Fair, International Lather Goods Fair,

Tex-Styles India, Delhi Book air, Arogya, Aahar, Sajavat Fair, Stationery Fair,

Gardening fair (new event), Sports Goods & Physical Fitness Equipment Exhibition, I.T.

India and Education and Job Fair. In addition, 70 other exhibitions are being organized

by Industry Associations, EPCs and private fair organizers. These include Indian

Handicrafts & Gifts Fair, Auto Expo 2006, Plast India, DEF Expo and World Book Fair.

During the year 2006-07, ITPO targets to organize about 26 fairs in India. This will

include some well established fairs like IITF, Aahar, Delhi Book Fair, IILF Chennai

besides event on new product like Gardening and Cool Home etc. In addition, the other

organizers are likely to hold 60 third party events including major fairs like Indian

Handicrafts and Gifts Fair, Garment Fair, Super Seven Show, Indian Enginerring. Trade

Fair, 2006.

3.3 Fairs Abroad

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During April-December 2005, ITPO organized participation in 46 trade fairs out of total

58 events expected to be held during the year 2005-06. Out of these 46 event, 18 were

general events and 28 were specialized events further of all the 46 events, 12 were in

WANA, 16 were in Europe, 8 in South East Asia and 10 in America. It includes “Expo

2005 Aichi, Japan” concluded in the month of September, 2005.

Trade Development Activities

ITPO organizes several export development programme by using different promotional

tools for selected products in identified markets. This created awareness of India’s

manufacturing and export capabilities especially in new markets, as also provided

opportunities to Indian exporters to garner export orders During the year up to

December 2005, four Buyer Seller Meets were organized- the 16th India Home Furnishing

Fair and the 26th India Garment Fair in Japan and one Buyer Seller Meet in Auckland,

New Zealand and another one in Sydney, Australia. These four events together generated

business worth USD 26.24 million and were attended by 2733 buyers from leading

department stores, wholesalers, importers, trading houses etc.

Two BSMs/ Indian exhibitions are targeted to be organized in Japan during 2006-07.

During the year up to November, 2005, visit of 10 Buying Delegations from Japan,

Russia, USA and Germany was hosted and one to one meetings were organized with the

potential India units during their visits. During 2006-07, we expect to host about 12

Buying Delegations from various countries across the globe.

In order to get maximum foreign business delegation at the time of IITF 2005, a Seminar

on “International Trade Opportunities in Technology” was organized. An export

potential Seminar is proposed to be organized during Tex-Styles India 2006.

Under the new Business Development Programme with Department Stores, two

Department Stores have been identified for organizing India Promotion during next year.

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4. Trade Initiatives with North America

4.1 Trade with North American Free Trade Agreement (NAFTA) Region

The North America Free Trade Agreement (NAFTA) was signed in 1994. It is a free

trade area among the United States of America, Canada and Mexico. It is the largest and

most important trading block of the world. India’s bilateral trade with member –

countries of the NAFTA are as follows:

India-U.S. Bilateral Trade

The US is India’s largest trading partner and foremost export destination. At present it accounts for 16.48 percent of India’s exports

and around 6.26 percent of India’s imports. India accounts for only about 1.06 percent of the USA’s total exports and imports.

iv. India’s Export and Import to/from the US

19

(In million USD)

Source: DGCI&S

Trend in India-U.S. Bilateral Trade

Growth of India's exports to the US in the year 2004-05 over the previous year was

15.50percent while the growth in the US exports to India was 35.72percent over the

previous year. There is a huge untapped potential to increase bilateral trade. Major items

of Indian exports to the US are: Gems & Jewellery (USD 4040.95 million); RMG Cotton

incl. Accessories (USD 1403.38 million); Manufactures of Metals (USD 738.02 million);

Primary & Semi-Finished Iron & Steel (USD 576.99 million); Drugs, Pharmaceuticals &

Fine Chemicals (USD 576.42 million). Major import items from the US to India are:

Electronic Goods (USD 1248.68 million); Machinery except Elec. & Electronic (USD

812.94 million); Other Commodities (USD 717.05 million); Organic Chemicals (USD

363.50 million); Transport Equipments (USD 348.42 million).

During the period April-August, 2005, India’s exports to the US at USD 6003.36 million

registered a positive growth of 14.26percent over the Corresponding period of the

previous year when the exports were USD 5254.17 million.

During the period April-August, 2005, India’s imports from the US at USD 2760.11

million registered a positive growth of 26.38percent over the corresponding period of the

previous year when the imports were USD 2184.02 million.

FDI Approvals

20

Year ExportsPercentageGrowth

ImportsPercentage Growth

Balance ofTrade

2000-2001 9305.12 10.83 3015.00 (-) 15.31 6290.122001-2002 8513.34 (-) 8.50 3149.62 4.46 5363.732002-2003 10895.76 27.98 4443.58 41.08 6452.182003-2004 11490.11 5.45 5034.86 13.31 6455.252004-2005 13271.47 15.50 6833.19 35.72 6438.28

The US ranks first and accounts for about 24.41percent (USD 16.40 billion) of the total

FDI approvals of USD 67.84 billion accorded since 1991. The leading sectors attracting

FDI from the US are Fuels (Power & Oil Refinery), Telecommunications, Electrical

Equipments, Food Processing Industries and Services.

Prospects in Trade for the Region

Considering the size of the U.S’s import market, there is an immense scope for expanding

our export base. In light of China’s performance in the U.S. market, it is felt that it should

be possible for India to raise its market share from 1percent to 2percent in the U.S.

market in the next three years, with the right medium term strategy.

India-U.S. Commercial Dialogue

During the visit of the U.S. President to India, a document “India-US Relations: A Vision

for the 21st Century” was released by the Prime Minister of India and the President of

United States of America on 21st March, 2000 at New Delhi. To implement the Indo-

U.S. Commercial Dialogue envisaged in that document, the Minister of Commerce &

Industry and Secretary, U.S. Department of Commerce had signed the India-United

States Commercial Dialogue on 23.3.2000 at New Delhi. Interactions under this

Dialogue have been taking place from time to time to sort out concerns of both sides on

bilateral issues. These include Video conferences on Intellectual Property Rights,

Agricultural Biotech & Food Safety Regulations and on Standards.

India - U.S. Trade Policy Forum

The establishment of the India-US Trade Policy Forum was announced during the visit of

Prime Minister Dr. Manmohan Singh to the US in July, 2005. It is designed to expand

bilateral trade and investment relations between India and the United States. The Trade

Policy Forum is a part of the overall economic dialogue between India and the United

States. The Forum had its first meeting in New Delhi on November 12, 2005 and

21

discussions were held on Tariff and Non-Tariff Barriers; Agriculture; Investment;

Services; Intellectual Property; and the Doha Round.

India-Canada Bilateral Trade

At present India’s exports to Canada accounts for 1.02percent of India’s global exports

and India’s imports from Canada accounts for 0.70percent of India’s total imports.

India’s exports and imports to/from Canada have been as below:

v. India’s Export and Import to/from Canada(In million USD)

Source: DGCI&S

During the period April-March, 2004-05, India’s exports to Canada at USD 818.25

million registered a positive growth of 7.21percent over the corresponding period of the

previous year when the exports were USD 763.20 million.

The major commodities of exports to Canada are Readymade Garments of Cotton

including accessories (USD 193.07 million), Drugs, Pharmaceuticals & Fine Chemicals

(USD 106.35 million), Manufactures of Metals (USD 58.67 million), Cotton Yarn,

Fabrics, Made-ups (USD 52.58 million), Machinery and Instruments (USD 34.64

million) were the major products exported to Canada.

The major commodities of imports from Canada are Newsprint (US D 117.21 million),

Pulses (USD113.70 million), Fertilizers (USD 112.11 million), Pulp and Waste Paper

22

Year ExportsPercentageGrowth

ImportsPercentage Growth

Balance ofTrade

2000-2001 656.47 - 397.07 - 259.402001-2002 584.42 (-) 10.97 529.43 33.28 55.382002-2003 698.27 19.40 566.29 6.96 131.982003-2004 763.20 9.30 725.89 28.18 37.312004-2005 818.25 7.21 760.33 4.74 57.92

(USD 69.19 million) and Electronic Goods (USD 59.96 million) were the major products

imported by India.

During the period April-August, 2005, India’s exports to Canada at USD 363.52 million

registered a positive growth of 13.10percent over the corresponding period of the

previous year when the exports were USD 321.43 million.

During the period April-August, 2005, India’s imports from Canada at USD 292.34

million registered a positive growth of 42.83percent over the corresponding period of the

previous year when the imports were USD 204.67 million.

The thrust areas for increasing India’s export to Canada are: Leather and Leather Goods,

Gems and Jewellery, Sports Goods, Chemicals and Pharmaceuticals, Processed Food

(both agriculture and marine), Engineering Goods, Auto parts and Ancillaries, Computer

Software Packages etc.

Annual Trade Policy Consultation Meeting

In October, 2003, the Prime Ministers of India and Canada had announced the holding of

annual Trade Policy Consultation Meetings between the Secretaries of the two countries.

The first meeting was held in New Delhi. In the second meeting, which was held on 16 th

May, 2005 in Ottawa, Canada, consultations covered a range of issues including progress

of WTO negotiations, respective bilateral and regional trade policy initiatives, ways to

enhance two-way investment flows and trade promotion efforts, and market access

irritants.

4.2 Measures Undertaken for Export Promotion to NAFTA

23

Dissemination of trade related information with respect to NAFTA partners is

coordinated with the Apex Chambers of Commerce / EPCs. Emphasis is laid on the

identified important sectors for expansion and consolidation of our trade. The analyzed

trade data of NAFTA countries is regularly passed onto the Apex Chambers of

Commerce and Export Promotion Councils for dissemination among their member

exporters, who are also provided assistance for promoting exports, participation in

fairs/exhibitions, identification of export products and potential market areas for exports,

details of reputed buyers etc. The difficulties faced by the exporters in NAFTA countries

are regularly taken up with the concerned authorities in these countries and the issues are

resolved through correspondence, video conferences and meetings. The various

legislations/ steps taken by these countries and the possible impact of these measures on

Indian exports are analyzed regularly and follow up action is taken in consultation with

other Ministries/Departments and our Missions.

5. Current Status of Leather Exports from India

India accounts for approximately two percent of the world trade in leather and leather

products. To be on the fast track of growth and to have a larger cake in the international

business, continuous technology up gradation and modernization are the most powerful

driving forces like in any other manufacturing sector that dreams steady growth and

expansion. With this being the primary objective, India's Council for Leather Exports

(CLE) has taken a number of initiatives. To propel the combined efforts of the tanning

and manufacturing sectors, the Central Leather Research Institute (CLRI), the Fashion

Technology and Development Institute and CLE as the main cog in the wheel, an action

plan has been chalked out. The growing international demand apart, the action plan also

24

suggested measures to face Indian leather's industry's major compt1itors in Asia: China,

Indonesia, Korea and Taiwan.

To boost the country's leather industry, the Indian federal government has earmarked a

Rs 4.5 billion (USD 95 m) grant to be made available to the industry over a span of five

years but that's not without any string. The fund availability is conditional upon the

sector's attracting an annual investment of Rs 2.2 trillion. In 2002, investments in the

leather sector stood at Rs 410 million. Footwear and their components account for about

25 percent of India's total leather products exports. These two markets also offer Indian

leather industry vast scope for exports of Saddlery and harness.

Besides the European market where Indian leather products already enjoy a strong

presence, the US too is emerging as a very strong and promising export destination for

Indian leather industry. US today accounts about 25 percent of a massive USD 96 billion

global trade in leather and leather products. The importance of European market could be

gauged by the fact three major EU countries-Germany, Italy and UK- today accounts for

approximately 42-45 percent of leather and leather products exports from India. These

three countries together exported leather products worth USD 814.82 m in 2001-02

against country's total leather and leather products exports valued at USD 1.93 billion.

CLE is trying to make a dent in new 1larkets. Focus countries include the Latin American

countries, Israel and Japan. Japan is the fifth largest importer of leather & leather

products in the world. Japan now imports over USD15 million worth leather and leather

products from India. In fact, between 1998 - 99 and 2001-02, India's exports leather

products to Japan have more than doubled. According to the latest available provisional

data, exports in the first 10 months in fiscal 2002-03 to Japan stood at USD 7.53 million

against USD 7.30 m during the comparable period of 2001..02. CLE aims at raising

India's share in Japan's total imports of leather and leather products to 2 percent by 2005-

06 from the current level of 0.5 percent which in other words means forex earnings to the

tune of USD 70 m in next three years from the 2001-02 level of over USD 15 m.

25

5.1 About Council for Leather Exports (CLE)

The Council for Leather Exports was set up in July 1984. A non-profit company

registered under the Indian Companies Act, 1956, the Council functions under the

Ministry of Commerce, Government of India. The Council is entrusted with export

promotion activities and overall development of the Indian leather industry. The

Council's activities also include promoting Foreign Direct Investments and Joint

Ventures in the Indian leather industry. The CLE serves as a bridge between Indian

leather exporters and buyers all over the world.

Council's Services to the Indian Leather Industry

Collecting, collating and disseminating world market intelligence

Updating the information on global trends in fashion & design, product

development and adaptation

Dissemination of information of commercial and technological nature through

seminars, news bulletins and magazines

Organizing participation of Indian exporters in international fairs and buyer-seller

meets Sponsoring sales-cum-study teams and trade delegations

Inviting foreign experts for providing technological inputs to Indian leather

exporters

Organizing international leather fairs in India

Council's Services to Overseas Buyer

Serving as a focal point for disseminating information on Indian manufacturers

and exporters

Organizing visits of buyers' delegations from different countries

Liaising with various international organizations dealing with trade information

Providing trade and commercial information on Indian leather industry

26

5.2 GLOBAL LEATHER INDUSTRY

The global leather industry is valued at about USD 85 billion.

Most of the producing countries are developing countries, while developed markets such

as the US are major consumers of leather products. The industry is buyer-driven, with

producing countries manufacturing in line with specifications, guidelines and technical

advice provided by the buyer countries.

China and Italy are the leading producing and exporting nations in the world with exports

worth USD 19 billion and USD 13 billion respectively. India, with an output of USD 4

billion and exports of USD 2.4 billion, is placed third. The leather industry occupies a

prominent place in the Indian economy in view of its substantial export earnings,

employment potential and growth. The industry provides employment to about 2.5

million people, of which 30 per cent are women.

Exports have risen from USD 1604 million in 1999-2000 to USD 2379 million in 2004-

05 at a CAGR of 8 per cent. India has a 2.32 per cent share in the global leather trade and

ranks eighth in the world in terms of the countries foreign exchange earnings from the

industry.

The composition of exports has also been changing, with more and more value added

products being exported. In 2004-05, for example, value added finished products

constituted around 80 per cent of the total exports from the industry, a far cry from 7 per

cent in 1956-57. The value addition is at present to the tune of 200 to 500 per cent. India

has plans to double its leather exports over the next 5 years It has been estimated that

India has the capacity to meet nearly 10 per cent of global leather requirement.

The Indian leather industry comprises the following key sub-sectors - tanning and

finishing, footwear, footwear components, leather garments and leather goods and

accessories. A large part (nearly 60-65 percent) of the production is done by the

small/cottage sector.

Leather and leather products production is centered in southern, northern and eastern

India. Key production units are located in Tamil Nadu, West Bengal, Uttar Pradesh,

Punjab, Karnataka, Andhra Pradesh, Haryana and Delhi. Tamil Nadu is the biggest

27

leather exporter in the country with the south accounting for 43 percent of the country’s

share. The industry uses primarily indigenous natural resources with little dependence on

imported resources.

5.3 Forms of Leather Exported

Finished leather

Footwear and components

Footwear

Components

Leather garments

Readymade Garments

Leather goods

Footwear and Components

The footwear segment includes shoes, slippers and sandals. Shoe uppers and soles are

part of the foot wear components. India's per capita annual consumption of footwear is

around 1.5 pairs against the per capita annual consumption of approximately 5 to 6 in

developed countries like USA & UK. As leather footwear is costlier than other substitute

material footwear made from PVC, PU, Rubber, TPR etc., and the leather footwear

segment accounts for less than 25 per cent of the total footwear market in India. Thus, the

per capita consumption of leather footwear is less than 0.5 pairs The domestic production

of leather footwear and components has increased, from approximately 430 million pairs

in 1991-92 to 565 million pairs in 1994-95.

In future, the domestic demand is estimated to grow at a faster pace due to a rise in urban

population, rise in middle class population which has already crossed the 200 million

mark. A number of large players (with a few having tied up with international players)

have entered the shoe market and are developing brand culture in this segment. The

major domestic players in footwear are Bata, CSC, Aero, Liberty, Masco, Wasan,

Phoenixes. The exports (especially of shoe components) are also likely to grow, with a

28

number of large players setting up units with 75 per cent export commitment.

Increasingly major multinationals are shifting their production base to countries with

cheap labor costs. The overall demand for this segment is estimated to grow by more than

15 per cent p.a. in future. As part of the liberalization process, the government has

permitted the setting up of shoe and component manufacturing units by large players,

with an export commitment of 75 per cent.

Leather Garments and Leather Goods

The leather garments industry includes manufacture of jackets, trousers, skirts etc.

Leather goods include belts, wallets etc. The domestic production of leather garments and

leather goods was 3 million and 73 million pieces respectively. The bulk of leather

garments production is meant for export, due to lower domestic consumption on account

of weather conditions. India does not have a significant share in the world leather

garment market, inspite of its high potential. The future domestic demand for leather

garments may not grow as fast as the export demand. However, both the domestic and

export demand for leather goods are likely to grow at a fast rate, in future. A few major

corporate houses like Hindustan Lever, L&T, Ponds, and Tata Exports etc. have also

entered into marketing and exports of leather products.

As far as Saddlery goods are concerned, it is almost based on cottage and small scale

units. Kanpur is the only production centre of saddlery goods in India.

The Tanning Industry

The industry has a large tanning capacity per day but it utilizes only 60-70percent of its

installed capacity. The turnover of the tanning of the tanning industry is estimated at INR

80-90 billion for the year 1999-2000. The industry produces about 2 billion sq.ft of

finished leather of which only 10-15 percent valued at USD 240 million. is exported. The

problem relating to effective discharges of effluents which is a WTO compulsion is

increasingly threatening the small and medium scale tanneries all over the country. The

tanning industry is heavily dependent on indigenous raw hides and skins for its supply of

29

raw materials which is very fragmented. Imports are low despite exemption from customs

duties due to high import prices (3-4 times higher) and absence of appropriate machinery

to process the imported hides and skins. As international pressures to supply good quality

leather products mount, the leather manufacturers would have to increase the use of

imported hides and skins to improve the image of Indian Leather and Leather products. In

the Indian tannin sector, the tiny units primarily engage in producing semi-finished

leather, the small units engage in producing both semi-finished leather and finished

leather and the large units are usually fully integrated units. There are many drawbacks in

this industry, it needs to upgrade technology, it needs proper finance for high capital

investment, poor & erratic Raw material, production and process and infrastructure.

Footwear Industry

There are nearly 4000 units engaged in manufacturing footwear in India. The industry is

dominated by small scale units with the total production of 55percent. The total turnover

of the footwear industry including leather and non-leather footwear is estimated at INR

85-95 billion including INR1200-14,000 million in the household segment. India's share

in global leather footwear imports is around 1.4percent Major Competitors in the export

market for leather footwear are China (14percent), Spain (6percent) and Italy (21percent).

Leather Garments & Goods

These two segments are essentially dominated by the small scale sector with LSIs having

a very negligible share of less than 3percent in garments. Due to increased export

demand, the capacity for the leather garment industry has been rising and is presently 18

million pieces per annum. Production is placed at 12 million pieces per annum with

capacity utilization at 60-75percent with an aggregate turnover of INR 22,000 million.

The share of leather garments in total exports of leather and leather products has been

rising and is presently around 24percent, having grown at CAGR of 9percent, since 1995-

96 to reach INR 21,040 million in 2000-01. India's import in world import garments is

around 11 percent. Our main competitors are China, Italy and Turkey.

5.4 Export duty Changeable on Indian Leather products

vi. Export duty charged on Indian Leather goods S.No. Description of Article Duty Rate

30

(percent)

1. E.I tanned leather 15

2. Snake skin 10

3. Finished leather of goat, sheep and bovine animals and

of their young ones

Nil

4. Raw fur Iamb skins 10

5. (a) Clothing leather fur suede/hair, hair-on

suede/shearing suede leathers

Nil

(b) Fur leather

(c) Cuttings and fleshing of hides and skins used as raw

materials for manufacturing animal glue gelatin

Nil

6. Luggage leather-case hide or side/suit case/hand bag

luggage/cash bag leather

25

7. Industrial leathers, namely: 15

(a) Cycle saddle leathers 15

(b) (i)Hydraulic/packing /belting/washer leathers 25

(ii) Industrial harness leather 15

8. Picking band leathers 15

9. Strap/combing leathers 15

10. Miscellaneous leathers, namely :

(a) Book binding leathers Nil

(b) Skiver leathers Nil

(c) Transistor case/camera case leathers 25

11. Fur of domestic animals, excluding Iamb fur skin Nil

12. Shoe upper leathers, namely:

(a) Bunwar leather Nil

(b) Kattai/slipper /sandalleather Nil

(c) Chrome tanned sole leather Nil

31

5.5 Global Exports vis-à-vis India's Export

The global trade in leather and leather products increased over the years and has

reached USD 88 billion in 2004

The export of Indian leather and leather products grew manifold over the past three

decades and its current share in global trade is 2.51 percent.

In world import of leather, India's share is 2.24percent. the major exporting countries

of leather and their shares are Italy 23.39percent, Korea 9.60percent, the USA

6.80percent, Argentina 6.11percent, and Germany 5.72percent, whereas India's share in

world import of leather footwear is 1.43percent.

The major exporting countries of leather footwear and their shares are Italy

16.62percent, China 15.00percent, Portugal 5.63percent, Spain 5.600,/0, Brazil

4.28percent, Indonesia 3.61percent, Germany 3.'6percent, Belgium Luxembourg

2.69percent, the UK 2.56percent etc.

In world import footwear components, India's share is 4.96percent. The major

exporting countries of footwear components and their shares are Italy 20.12percent,

Korea 7.80percent, China 7.45percent, The USA 6.98percent , Romania 5.74percent,

Germany 4.63percent, Tunisia 3.15percent etc. .

In world import of leather garments, India's share is 11.17percent The major

exporting countries of leather garments and their shares and China 39.22percent ,

Pakistan 9.24percent, Turkey 7.10percent, Italy 7.02percent, Germany 5.02percent ,

Korea 4.98percent, the USA 2.54percent etc.,

In world import of leather goods, India's share is 7.08percent. The major exporting

countries of leather goods and their shares are Italy 21.65percent, China 16.52percent,

France 11.51 percent, the USA 5.22percent, Greece 4.83percent, Thailand 4.62percent,

Germany 3.69percent etc.

In world import of leather gloves, India's share is 9.62percent. The major exporting

countries of leather gloves and their shares are China 35.77percent, Pakistan 2.62percent,

Germany 2.02percent, Italy 1.92percent, Hungary 1.57percent, Mexico 1.20percent etc.

32

In world import of saddlery & harness, India's share is 8.27percent. The major

exporting countries of saddlery & harness and their shares are China 14.27percent,

Germany 11.34percent, the UK 10.55percent, the USA 7.41percent, Denmark

3.96percent, Mexico 3.68percent, Italy 3.68percent etc.

In world import of non-leather footwear, India's share is 0.08percent. The major

exporting countries of non-leather footwear and their shares are China 26.03percent, Italy

6.73percent, Belgium-Luxemburg 4.35percent, Indonesia 3.49percent, Spain 2.61percent,

France 2.06percent, Thailand 1.79010, etc.

India has stiff competition in international market from countries like China,

Vietnam, Thailand, Indonesia, etc., which are emerging as major manufacturing

countries.

6. USA – Country Profile

6.1 Economic Overview

GDP

33

Consumer spending decelerated, increasing 2.5 percent after increasing 4.8 percent. The

slowdown in consumer spending accounted for more than half of the slowdown in real

GDP growth.

Business investment in equipment and software turned down, decreasing

1.0 percent, following a 15.6- percent increase.

Exports decelerated, increasing 3.3 percent after increasing 14.0 percent.

Inflation, as measured by prices for domestic purchases, increased 4.0

percent in the second quarter after increasing 2.7 percent. Excluding food and energy,

prices increased 2.9 percent, following a 3.0-percent increase.

Personal Income

Wages and salaries, the largest component of personal income, increased

0.6 percent in June after remaining unchanged in May. Growth turned

Up in private industries, reflecting a strong upturn in services industries.

Interest and dividend income rose only slightly more than the previous month.

Proprietors’ income increased 0.1 percent, after increasing 0.7 percent.

Balance of Payments

The U.S. current-account deficit decreased USD14.4 billion to D208.7 billion

(preliminary) in the first quarter of 2006.

Exports

Exports of goods and services increased USD 2.4 billion in June to USD120.7 billion,

reflecting an increase in goods exports. Services exports decreased.

34

The increase in goods exports reflected increases in all major categories. The

largest increases were in capital goods, industrial supplies and materials, and automotive

vehicles, parts, and engines.

The decrease in services exports reflected decreases in travel and other private

services.

Imports

Imports of goods and services increased USD2.2 billion in June to USD185.5 billion, as

both goods imports and services imports increased.

The increase in goods imports was more than accounted for by increases in

consumer goods and automotive vehicles, parts, and engines. Industrial supplies and

materials and capital goods decreased.

The increase in services imports mostly reflected increases in royalties and license

fees and passenger fares.

Industrial Growth

Real growth in the services sector slowed to 4.1 percent in 2005 due primarily to slower

growth in information and real estate and rental and leasing.

Manufacturing increased 4.0 percent in 2005 and accounted for over 90

percent of the 2.6 percent growth in the goods sector.

Information-communications-technology producing industries comprised

less than 4 percent of GDP and accounted for nearly 13 percent of real GDP growth.

35

vii. Economic Indicators of United States(Figures in USD)

Source: http://www.whitehouse.gov

6.2 Trade Policy Developments

On 18 May 2005, the US Committee for the Implementation of Textile Agreements

(CITA) announced to invoke safeguards on four categories of textiles and clothing

imports from China, including men's and boys' cotton and man-made fiber shirts, not knit

(category 340/640), man-made fiber trousers (category 647/648), man-made fiber knit

shirts and blouses (category 638/639), and combed cotton yarn (category 301

As a result, on A will request consultations with China on these products and, on the date

those consultations are requested, will put in place quotas that will limit the growth in

imports of the covered products. The quota level will be 7.5percent above the amount of

imports of these products from China entered during the first 12 months of the most

recent 14 months preceding the month in which the request for consultations is made.

The quota level will be prorated to respond to the number of days left in the year as of the

36

Indicator Previous Current

Per Capita Income (at Nov. 2005 currency rates)

27,551 27,640

Farm Sector Income 72.6 56.2

Poverty 12.5percent(2003 Census)

12.7percent(2004 Census)

Consumer Price Index 0.4March 2006

0.6April 2006

Producer Price Index 0.5March 2006

0.9April 2006

Crude Oil Prices (USD/barrel) 70.38April 28, 2006

72.14May 5, 2006

Change in Gross Domestic Product 4.1percent3rd Qtr 2005

1.1percent4th Qtr 2005

Change in Corporate Profits 4.6percent2nd Qtr 2005

(-) 4.0percent3rd Qtr 2005

Change in Personal Consumption Expenditures

0.9percentNovember 2005

0.9percentDecember 2005

date of the request for consultations. Consultations must be held within 30 days of

China's receipt of the request, and will last for a maximum of 90 days. In the event a

mutually satisfactory solution cannot be reached by the conclusion of the consultations

period, the quotas will remain in place through the end of 2005.

On 13 May 2005, CITA announced to invoke safeguards on three categories of textiles

and clothing imports from China, including cotton knit shirts and blouses, cotton trousers,

and cotton and man-made fiber underwear. On 28 April 2005, CITA also agreed to

consider the textile safeguard petitions submitted on 6 April by a coalition of textile

industry groups. The products targeted by the petitions and subject to consultation are as

follows: men's and boys' cotton and man-made fiber woven shirts; cotton and man-made

fiber sweaters; cotton and man-made fiber brassieres; cotton and manmade fiber robes

and dressing gowns; other synthetic filament fabric; man-made fiber knitted shirts and

blouses; and manmade fiber trousers.

In a related development, the US Court of Appeals for the Federal Circuit (CAFC) issued

an order on 27 April lifting the preliminary injunction issued by the Court of International

Trade (CIT) on 30 December 2004. As such, CITA has resumed consideration of the

threat-based safeguard petitions submitted by the domestic industry during the fourth

quarter of last year until the courts decide the case of its merits. These petitions include

cotton yarn, cotton trousers, man-made fiber trousers, men's and boys' wool trousers,

cotton shirts, man-made fiber shirts, men's and boys' cotton and man-made fiber woven

shirts, cotton and man-made fiber underwear and other synthetic filament fabric; knitted

fabrics, cotton and man-made fiber brassieres and cotton and man-made fiber robes and

dressing gowns.

On 22 October 2004, the CITA determined that the US market for socks (Categories

332/432 and 632 Part) was being disrupted by imports from China, and that this situation

threatens to impede the orderly development of trade in these products. As a result, CIT

A has established a twelve-month limit on socks from China from 29 October 2004 to 28

October 2005.

37

On 5 April 2005, the US Department of Commerce (DOC) announced two major changes

to AO practices involving non-market economy (NME), including China. Under the new

practice, application for a separate AD rate will no longer be made by completing and

returning the Section A of the questionnaire to the DOC. Instead, an applicant should

complete an application form which will be posted for each investigation on DOC's

website. In addition, each exporter applying for a separate rate will be required to list all

the suppliers whose merchandise they export to the US during the period of investigation

or review. The dumping margin assigned by the DOC to an exporter will be a combined

rate, which is calculated from the rate of the exporter and those of the producers' which

supplied merchandise to it for export to the US.

Trade Rules and Regulations

Goods brought into the US are often subject to import duties, but import licenses are

generally not required. There are no foreign exchange controls over payments for

imports.

Imports are usually subject to ad valorem and/or specific import duties. Regular rates are

applied on imports from locations enjoying normal trade relations (NTR) or formerly

most favored-nation status, including Hong Kong and the Chinese mainland. Products

from some countries receive preferential import treatment via the US Generalized

Scheme of Preferences (GSP). CBP has final authority on tariff classification for duty

rates purposes.

The US rigorously enforces laws on dumping. When the DOC determines that a class of

foreign goods is being, or is likely to be, sold to purchasers in the US at less than its fair

value, an antidumping duty investigation may be conducted. The USITC is responsible

for conducting the final injury investigation. If all the determinations are affirmative, the

DOC will issue a duty order.

Imported goods are usually required to be marked with the country of origin in English.

The marking has to be permanent, legible and conspicuous. Additional labeling is

required on food, cosmetics, textiles and apparel, selected household products and

38

flammable fabrics.

Certain imported products must be approved by the proper US authority. For example,

certification by the Underwriters' Laboratory or ETL Testing Laboratories must be

obtained for electrical appliances, gas equipment and fire prevention apparatus. Under the

Convention on International Trade in Endangered Species of Wild Fauna and Flora

(CITES), the US requires specific documents for fur imports.

6.3 INDO-US LEATHER TRADE

Though US is the second largest importer of Indian leather and leather products after

Germany and UK, the Indo-US trade during the year 2004-05 has seen a significant jump

with 11.18 percent over and above the previous year 2003-04 trade value. The footwear

segment alone posted a growth of 15 percent over the previous year.

India's share in US leather garment sector in 2003 was 3.23percent, while during the

same year, leather goods accounts for 4.27percent and saddlery & harness 4.42percent.

The share of footwear is just above 1 percent. Therefore, there is immense potential for

Indian footwear in the US market, said Rafeeque Ahmed, chairman of CLE.

World leather and leather products market in 2003 was USD88 billion., out of which,

footwear constituted for USD 53 billion (60percent). The rest are leather garments and

accessories. Out of this nearly half the size of world footwear market (30percent world

footwear) is in US, the volume of which during 2003 was USD16, 083 million. It is this

segment, which is aimed by the Indian footwear companies to increase their exports to

US.

6.4 GOVERNMENT OF INDIA’S INITIATIVE

Ministry of Commerce, Government of India, has identified US as one of the "Focus

Markets" and is assisting CLE and individual exporters to reach the US footwear market.

CLE has engaged a marketing consultant MIs Footwear Consulting Group in 2002 to

chalk out the marketing strategy for the US market. As part of this strategy, CLE has

been taking part in WSA Fair in Las Vegas every year from 2002 and showcased Indian

products. CLE has also organized several Buyer-Seller-Meets (BSMs) during the WSA

fairs As a result, Wal-Mart, the biggest Retailer Stores of US visited India during Nov

39

2003 and since then started outsourcing from Indian companies. Today, Wal-mart is

sourcing its products from at least five Indian firms and the trade turnover for Wal-Mart

operations alone is expected to touch USD 80 million to USD l00 million in 2006.

40

7. CANADA – Country Profile

7.1 About the Country

A land of vast distances and rich natural resources, Canada became a self-governing

dominion in 1867 while retaining ties to the British crown. Economically and

technologically the nation has developed in parallel with the US, its neighbor to the south

across an unfortified border. Canada's paramount political problem is meeting public

demands for quality improvements in health care and education services after a decade of

budget cuts. The issue of reconciling Quebec's francophone heritage with the majority

Anglophone Canadian population has moved to the back burner in recent years; support

for separatism abated after the Quebec government's referendum on independence failed

to pass in October of 1995.

7.2 Economy - Overview

As an affluent, high-tech industrial society, newly entered in the trillion dollar class,

Canada closely resembles the US in its market-oriented economic system, pattern of

production, and affluent living standards. Since World War II, the impressive growth of

the manufacturing, mining, and service sectors has transformed the nation from a largely

rural economy into one primarily industrial and urban. The 1989 US-Canada Free Trade

Agreement (FTA) and the 1994 North American Free Trade Agreement (NAFTA)

(which includes Mexico) touched off a dramatic increase in trade and economic

integration with the US. Given its great natural resources, skilled labor force, and modem

capital plant Canada enjoys solid economic prospects. Solid fiscal management has

produced a long term budget surplus which is substantially reducing the national debt,

although public debate continues over how to manage the rising cost of the publicly

funded healthcare system. Exports account for roughly a third of GDP. Canada enjoys a

substantial trade surplus with its pr41cipal trading partner, the United States, which

absorbs more than 85percent of Canadian exports.

41

viii. Economic Indicators of Canada in 2006Indicator Unit Value

Population Estimate - Canada - 32,501,147Consumer Price Index - Total 1992=100 130.5Unemployment Rate percent 6.4Real GDP Growth Rate percent 2.9Target for the Overnight Rate1 percent 4.25Prime Interest Rate2 percent 6.0Employment - 16,504,800Labour Productivity - percent Change, Seasonally Adj.

percent 0.5

Corporate Operating Profits CAD 56,100,000,000Merchandise Imports CAD 32,807,000,000Merchandise Trade Surplus CAD 4,748,000,000

Real Gross Domestic Productpercent Change

0.9

Money Supply (M1) CAD 150,019,000Industrial Product Price Index 1997=100 113.7

Source: http://www.canadianbusiness.com

7.3 Trade Policy

Canada maintains a liberal trade regime. There are no foreign exchange restrictions, and

import licenses are only required for a limited number of goods. Imports are generally

subject to import duties.

Import licenses are required for items regulated under the Export and Import Permits Act.

The Act lists various agricultural products (poultry, eggs, and dairy products), a number

of textile and clothing items, and certain steel products.

The importation of certain commodities is however tightly controlled. Examples of

regulated goods include: food products, clothing, drug and medical devices, hazardous

products, some offensive weapons and firearms, endangered species and motor vehicles.

As agreed in the Agreement on Textiles and Clothing (ATC), the majority of textile and

clothing products of Hong Kong origin are subject to import quotas by Canada. In

compliance with the Phase 3 of the ATC liberalization process, effective from January 1,

2002, Canada removed 9 categories of Hong Kong textile and clothing products

fully/partially from quota restrictions. According to the ATC, all quotas on textiles and

clothing will be eliminated by 1 January 2005.

42

Duties are assessed on the transaction value (the price actually paid or payable for the

goods), including commission, brokerage, packing, royalties and transportation to the

Canada point. Hong Kong and China origin goods are eligible for the preferential tariffs

under the Canadian General Preferential Tariff (GPT) Scheme.

A provincial sales tax (PST) is assessed on all imports to British Columbia (7.5 percent of

the duty paid value), Manitoba (7 percent), Ontario (8 percent), Prince Edward Island (10

percent), Quebec (7.5 percent) and Saskatchewan (6 percent). Additionally, a broad-

based value-added sales tax, known as the goods and services tax (GST), is levied at

7percent. In the three Atlantic provinces (Newfoundland, New Brunswick and Nova

Scotia), the PST and GST were combined in April 1997 to form a harmonized sales tax

(HST) at a standard rate of 15percent for all goods and services. In addition, excise taxes

are charged on goods such as tobacco; wine; jewellery; some heavy automobiles;

automobile air conditioners; and gasoline, diesel fuel, aviation gasoline and aviation fuel.

Canada may impose anti-dumping duties on imports considered to be priced less than the

"nominal" price charged in the exporter's domestic market and caused material injury to

the concept industry in Canada. Currently, Canada imposes anti-dumping duty on seven

items from the Chinese mainland, including waterproof rubber footwear; women's leather

and non-leather boots; bicycles; garlic; hot-rolled carbon steel plate and sheet; waterproof

footwear and bottoms; leather footwear (metal toecaps); xanthenes and steel pipe nipples,

couplings and fittings.

Canada requires bilingual labeling (English and French) for most products. Bilingual

designation of the generic name on most pre-packaged consumer products is required

under the federal Consumer Packaging and Labeling Act. Under this Act, the product

identity declaration, net quantity declaration and dealer's name and principle place of

business must appear on the package/label of a consumer good sold in Canada.

The agency responsible for inspection of imports, Canada Customs and Revenue Agency,

also requires an indication of the country of origin on several classes of imported goods.

Goods not properly marked will not be released from Canada Customs \ll1til suitably

marked. In general, environmental claims that are ambiguous, misleading or irrelevant, or

that cannot be substantiated, should not be used.

43

METHODOLOGY

Nature of Study

The Thesis study in subject now is an exploratory study with a touch of descriptive

research. Fundamentally it is a Secondary Data Study.

Data Collection

Types of Data Collected

The data collection technique is solely secondary. The following types of secondary date

have been collected and used for the study.

Quantitative

Qualitative

Descriptive data

Insightful information

Data Collection Procedure

Qualitative and descriptive data where ever sought were collected and excerpts from such

article or reports have been put together. Those pieces of data are patched together in the

logical flow. Then the paragraph is rephrased to fit into the required context.

In case of Quantitative data the pieces of data have been dumped together. Then such

data is sanitized for consistency and reliability. Then such cluster of quantitative data is

used according to the situation demands, in a logical flow.

To explain it in a lucid manner, let us consider an example of collecting Data tables that

represent the break-up of the imports in the “Demand Side Analysis” section in this

report. First of all a big dashboard of table was copied from the source, then the unwanted

rows and columns were removed from it. The currency has been converted into the

uniform template. Then the sum total of such data has been obtained from following the

above stated steps.

44

Mode of Data Collection

Internet is the only source for obtaining the data for this Thesis. However for converting

the data into the usable format and context MS Word and MS Excel have been

extensively used.

Type of Data Analysis

Analytical Tools

Simple mathematical, statistical and business tools have been used for analysis of this

study.

Examples of Tools Used

Simple Percentages and growth rates have been used as a part of Mathematical

tools.

Using statistical tools like GAP, the complex data has been tabulated and drawn

into charts and analyzed subsequently.

As a part of business tools, SWOT analysis has been adopted for classifying and

understanding the qualitative data and hence coming out with the required conclusions.

Considerations

The study must include all the basic knowledge about the industry and Economies

involved in the study. For this purpose, an extensive understanding of the different

aspects of links involved in the whole value chain of the study had to be carried out. Once

the reader felt the gasp of the topic and nitty-gritty’s involved, I have introduced him to

various combination of the quantitative data relevant to the topic. Then it is time to

summarize and identify the key pieces of information. The right kind of analytical tools

(Gap analysis and SWOT in this case) have to be identified which would take us to the

conclusions.

45

ANALYSIS

8. Supply Side Analysis

8.1 Quick Facts About Indian Leather Market

India is the country with largest livestock, holding 21 percent large animals and

11percent small animals.

A source for 10percent global leather requirements.

Annual production value over USD 4 billion.

Annual export value over USD 2 billion.

Export growth CAGR 8.20percent (2000-04).

About 2.50 million workforces (30percent women).

Promising technology inflow and Foreign Direct Investment

Top priority to occupational safety and work environment

Enormous potential for future growth (domestic as well as export)

ix. Sources of Production of Leather Name of the State Locations

Andhra Pradesh Hyderabad, Guntur, Vijayawada, Rajamundry, VizianagaramBihar Ranchi, Muzzafarpur, Biharishariff, Patna, Dharbhang GayaGujarat Ahmedabad, Sarvakundala, Junnagadh, Rajkot, Bharuch,

Surat, BarodaJammu & Kashmir Srinagar, Anantanag, JammuKerala Trivandrlun, Trichur, Quilon, Calicut, EmakulamMadhya Pradesh Bhopal, Indore, Gwalior, JabalpurMaharastra Bombay, Sholapur, KolhapurRajasthan JaipurTamil Nadu Timchi, MadrasUttar Pradesh KanpurWest Bengal CalcuttaAssam GuwahatiMeghalaya ShillongKarnataka Bangalore, BelgaumDelhi Delhi Punjab Jalandhar, AmritsarOrissa Cuttak, Berhampur

46

I. Important Hubs for Leather Production in India

Source: http://ibef.org

Livestock

The total number of live stock including Buffalos, Sheep, Goats, Pigs, Horses and Ponies,

Mules, Donkeys, Camel, Yaks and Mithun available as on 2003 in India were 485

million. The value of output of the Livestock was worth INR 24.33 billion.

47

8.2 Market Size

The Indian leather exports are targeted to grow from the present size of USD 2.4 billion

to over USD 5billion by 2010.

x. Category-wise Leather Producing FirmsName of the Category Number of firms

Barcodes, Stickers & Labels 406 Fashion And Designer Bags 614 Finished Leather 600 Footwear, Shoes, Components & Accessories 895 Horse & Animal Clothings and Accessories 97 Leather Bags, Purses, Wallets & Cases 1024 Leather Chemicals 103 Leather Diaries, Journals, Notebooks & Other Leather Stationery Items

67

Leather Garments 528 Leather Goods & Accessories 1524 Leather Laces, Cords, Threads, Straps & Other Leather Craft Supplies

43

Merchant Traders 243 Miscellaneous Garment, Textile & Leather Accessories 1577 Threads, Laces, Pads, Linings & Other Sewing Accessories 445

Total number of firms8166

Source: http://dir.indiamart.com

Estimated Production Capacity of the Indian Leather Industry

xi. Leather Production by CategoryProduct Capacity (million pieces per annum)

LeatherHides 65Skins 170Leather ProductsLeather Footwear 909Leather Shoe uppers 100Non-leather Footwear 1056Leather Garments 16Leather Goods 63Industrial Gloves 52Saddlery 0.10

48

Source: http://www.leatherindia.org

8.3 Performance of Leather Exports in the Past

Export of leather and leather manufactures recorded a marginal decline of 1.0percent

during April-November, 2005. The value of export decreased to INR 6812 0 million from

INR 6876 0 million during the corresponding period of the previous year. While exports

of leather manufactures registered a decline of 6.9percent, exports of Leather Footwear

increased by 11.0percent in 2004-05.

Exports by Product Category

II. Breakup of Total Indian Leather Exports in 2005 - 06

xii. Value of Indian Leather Products Exported During 2005 – 06

49

(Figures in million USD)

Source: http://www.leatherindia.org

Looking at the Indian exports of various product categories to the world in the recent

past, there is no doubt with the fact that there has been some continual growth in the

volumes of leather goods. And there has been consistency in the share of Finished

Leather, Leather Footwear and Non-Leather Footwear in the total exports has been

consistent.

III. Value of Leather and Leather Products Exported During 1999 - 2005

50

CATEGORYAPR-MAR 2004 - 05

APR-MAR 2005 - 06

PercentageVariation

Finished Leather 607.73 606.06 -0.28percentLeather Footwear 657.78 786.76 19.61percentFootwear Components 179.21 179.04 -0.10percentLeather Garments 329.44 328.44 -0.30percentLeather Goods 585.72 649.14 10.83percentSaddlery and Harness 61.71 76.40 23.81percentNon – Leather Footwear 73.78 68.75 -6.82percentTOTAL 2495.37 2694.59 7.98percent

Derived: http://www.leatherindia.org

Indian Exports by Geographic Locations

xiii. Some of the Top Destinations Including Canada for Indian Leather Exports (Figures in million USD)COUNTRY 1999- 2000 2000- 01 2001- 02 2002-03 2003-04 2004-05USA 258.24 342.78 286.89 246.44 251.58 279.70Germany 293.59 307.17 304.46 272.53 329.82 336.69UK 266.29 270.09 248.89 240.96 250.65 299.21Italy 165.47 241.07 263.11 255.92 285.02 242.60Spain 66.72 100.75 101.30 110.56 161.23 169.21Hong Kong 55.22 98.32 121.43 165.70 226.97 236.52

France 84.36 90.68 89.72 88.43 109.82 132.73

Netherlands 44.17 55.56 60.50 50.95 57.75 63.32Canada 21.42 26.66 27.81 24.81 25.59 28.19Others 94.37 122.48 132.78 131.34 179.55 209.30TOTAL 1604.35 1963.5 1936.4 1875.21 2216.45 2379

Looking at the Indian leather exports to various geographies, we can make out that

Germany, US and UK have been biggest markets for leather exports to it. In the year

2005, US have occupied third position in terms of volumes of world leather exports from

India and Canada occupies 9th position.

India’s Leather Imports

51

India is not only an exporter of leather but also an active importer of raw and processed

leather.

xiv. Leather Imports by India(Figures in million USD)

Source: http://commerce.nic.in

8.4 Trade with North America

Here we consider the volumes of leather exports to North America and its share in the

total world exports from India. The figures show that US had a considerable share in

Leather Footwear exports and comparatively higher share in Leather category as well. In

Raw Hides and Skins North American region had a meager share in 2005.

xv. Exports of Broad Categories of Leather to USA and Canada from India(Figures in million USD)

Product Period USA Canada Total

52

CommodityApr – Mar2004 – 05

Apr – Mar2005 – 06

Percentage Growth

Raw Hides and Skin 50.21 58.08 15.66percentLeather 212.70 232.41 9.27percentTOTAL 262.91 290.49 10.49percent

Category Exports

Leather

FY: 2004-05 12.72 1.70 607.73

FY: 2005-06 11.82 1.32 606.06Share in category exports in 2005-06

1.95percent 0.22percent 100percent

Percentage change during last two years

-7.05percent -22.67percent -0.28percent

Leather Footwear

FY: 2004-05 93.18 7.70 657.78

FY: 2005-06 119.17 9.81 786.76Share in category exports in 2005-06

15.15percent 1.25percent 100percent

Percentage change during last two years

27.89percent 27.35percent 19.61percent

Footwear Component

FY: 2004-05 1.54 1.30 179.21

FY: 2005-06 1.89 1.45 179.04Share in category exports in 2005-06

1.06percent 0.81percent 100percent

Percentage change during last two years

22.93percent 12.26percent -0.10percent

Raw Hides

&Skins

FY: 2004-05 0.87 0.08 50.21

FY: 2005-06 1.86 0.07 58.08Percentage change during last two years

113.23percent -18.76percent 15.66percent

8.5 Competitive Scenario

India’s Ranking in the World Leather Exports

India stands 8th in the world’s exports, considering its value of leather exports as a share

of world’s total Leather exports (supplies)

xvi. Top 10 Exporters of Leather as a Share of the World’s Exports(Figures in million USD)

53

Country 2000 2001 2002 2003 2004

CHINA (%) 18.78 19.50 21.57 22.46 23.44ITALY (%) 16.79 17.42 17.27 16.79 16.85HONG KONG (%) 13.82 12.47 12.17 11.20 11.12FRANCE (%) 3.45 3.61 3.71 3.91 4.14GERMANY (%) 3.22 3.42 3.89 3.75 3.96BRAZIL (%) 3.32 3.47 3.42 3.24 3.61SPAIN (%) 3.36 3.51 3.75 3.50 3.36INDIA (%) 2.76 2.61 2.51 2.57 2.61USA (%) 3.01 2.72 2.51 2.28 2.55BELGIUM (%) 2.09 2.56 2.75 2.44 2.39TOTAL EXPORTS 73163.7 75343.7 74920.3 85650.0 91586.8

Derived from: http://www.leatherindia.org

India stands 4th, when considered its value of Leather exports as a share of world’s total

Leather imports (demand).

xvii. Top 10 exporters of Leather as a Share of the World’s Imports(Figures in million USD)

Derived from: http://www.leatherindia.org

India’s Share in the Global Imports of Leather Products

India’s shares in the world-wide imports of various leather product

categories are as follows:

xviii. India’s Share in the Broad Categories of Global Leather Imports

Category Details 1999 2000 2001 2002 2003CAGR previous 5 years

LeatherW.I 12789.88 14965.69 16197.23 15882.95 17052.57 5.58

% 1.88 5 % 2.55 % 2.84 % 3.20 % 3.26 15.99

Leather Footwear

W.I 26901.92 27598.13 28908.00 30600.23 33297.17 4.53

% 1.40 % 1.38 % 1.37 % 1.38 % 1.66 % 11.54

Footwear Components

W.I 4537.86 4446.66 4598.18 4374.37 4612.19 -0.02

% 4.74 % 5.35 % 5.09 % 4.00 % 3.50 % -7.47

Leather W.I 3162.00 4457.92 4771.19 4223.19 4131.86 4.70

54

Country 2000 2001 2002 2003 2004

CHINA (%) 17.77 18.23 19.73 21.42 21.99ITALY (%) 15.89 16.28 15.80 16.0 15.81BRAZIL (%) 3.14 3.25 3.13 3.09 3.39INDIA (%) 2.54 2.40 2.29 2.47 2.44ROMANIA (%) 1.09 1.31 1.55 1.74 1.71KOREA REP. (%) 3.19 2.68 2.23 1.81 1.63INDONESIA (%) 2.49 2.16 1.60 1.48 1.53TAIWAN (%) 1.97 1.63 1.59 1.39 1.26TOTAL IMPORTS 77331.26 80602.47 81895.61 89825.08 97606.18

Garments % 10.98 % 10.33 % 7.94 % 6.44 % 7.29 % -4.39

Leather Goods

W.I 5366.96 5862.81 6173.66 6601.73 7412.44 7.01

% 5.19 % 5.86 % 5.21 % 5.08 % 5.44 % 5.31

Leather Gloves

W.I 1336.72 1391.41 1358.07 1364.58 1470.07 -0.36

% 7.32 % 6.94 % 6.31 % 6.60 % 9.25 % 7.61

Saddlery & Harness

W.I 416.60 447.84 464.07 497.99 593.81 9.40

% 8.19 % 9.53 % 7.68 % 8.77 % 8.88 % 10.02

TOTALW.I 54511.97 59170.47 62470.42 63545.05 68570.14 4.61

% 2.92 % 3.29 % 3.06 % 2.91 % 3.15 % 5.72

[W.I – World Imports (million USD)] [percent - India’s exports as a percentage of W.I]

8.6 Exports Promotion Measure for Leather Industry in India

As a part of the promoting measures of Leather and Footwear exports, following

initiatives have been announced by ministry of commerce in the 2006- 2009 Foreign

Trade Policy.

Leather and Footwear

Duty free import entitlement of specified items shall be 5percent of FOB value of

exports during the preceding financial year.

The duty free entitlement for the import of trimmings, embellishments and

footwear components for footwear (leather as well as synthetic), gloves, travel

bags and handbags shall be 3percent of FOB value of exports of the previous

financial year. The entitlement shall also cover packing material, such as printed

and non printed shoeboxes, small cartons made of wood, tin or plastic materials

for packing footwear.

55

Machinery and equipment for Effluent Treatment Plants shall be exempt from

basic customs duty.

Re-export of unsuitable imported materials such as raw hides & skins and wet

blue leathers is permitted.

CVD (Countervailing Duty) is exempted on lining and interlining material

notified at S.No 168 of Customs Notification No 21/2002 dated 01.03.2002.

CVD is exempted on raw, tanned and dressed fur skins falling under Chapter 43

of ITC (HS).

Approval for 117 (includes multi-product Zones) new SEZ s have been already

given, these SEZs would work with private sector coordination. Out of those 117

SEZs , 6 SEZs are already operational.

Problem Areas in Export Promotion Measures

No separate SEZ for promotion of Leather Exports

Neither SEZs nor EOU are designed for the development of leather

industry

9. Demand Side Analysis

9.1 North America’s Total Leather Imports

xix. Value of the Leather Apparel Imported by the U.S. in the Recent Past

56

(In million USD)

Source: http://www.ita.doc.gov

The leather imports by both U.S. and Canada over the last few years are as

follows:

xx. Imports of Leather by the North America in the Recent Past

57

Country 2000 2001 2002 2003 2004 2005

China 1,193.6 1,258.2 1,081. 1,061.3 916.9 801.4Italy 86.3 108.2 88.5 86.2 75.3 67.3India 128.8 129.4 77.3 69.7 68.8 50.1Pakistan 70.3 66.6 67.3 59.9 47.1 41.1Turkey 22.7 24.8 21.7 21.4 13.0 13.8France 13.7 14.2 13.0 11.9 10.4 9.1Canada 23.4 19.2 15.6 13.1 11.3 9.1Hong Kong 12.0 15.7 11.1 12.0 10.2 7.0Korea 67.6 42.4 28.4 169 11.8 5.2Indonesia 71.8 71.1 45.1 9.9 7.1 4.1Switzerland 0.6 1.2 0.1 0.2 2.8 3.5Mexico 5.5 4.1 3.6 3.1 3.8 3.3Romania 0.5 1.3 1.8 1.0 1.2 2.0Poland 1.1 2.3 1.4 1.0 1.8 1.6Germany 2.5 2.1 1.5 1.5 1.2 1.5Spain 2.5 2.5 2.3 2.0 1.6 1.5United Kingdom 2.9 2.5 2.7 2.7 1.6 1.3Slovenia 1.1 2.6 0.9 1.6 1.3 1.1Ukraine 0.02 0.05 0.1 0.1 0.6 0.9Philippines 11.4 4.9 1.7 0.9 0.8 0.7Uruguay 0.8 0.7 0.6 0.4 0.7 0.6Sri Lanka 0.1 0.03 0 0.1 0.7 0.5Argentina 1.3 0.3 0.6 0.6 0.5 0.4Brazil 0.3 0.1 0.1 0.3 0.6 0.3Tunisia 0.01 0.002 0.09 0.4 0.3 0.3Others 7.4 7.6 6.6 5.1 5.1 2.8TOTAL 1,729.4 1,783.1 1,474.9 1,384.6 1,197.6 1,031.6

(In million USD)

Source: http://commerce.nic.in

xxi. Value of the Leather Apparel Imports by Canada in the Recent Past(In million USD)

Source: http://strategis.ic.gc.ca

In case of the U.S., Canada is the top 7th source for the imports of Leather products where

as in case of Canada, U.S. occupies 3rd position as the most preferred source for Leather

imports. The volumes of Leather products exported by India to Canada are comparatively

far less than what it exports to the U.S.

U.S. Imports of Leather Products by Category

xxii. Value of the Leather Imports by the U.S. in the Recent Past

58

Country 2000 2001 2002 2003 2004

USA 20701.7 20964.1 20930.4 21155.5 22386.4CANADA 1537.2 1537.2 1571.4 1653.5 1804.6TOTAL 77331.2 80602.4 81895.6 89825.0 97606.1

Country 2001 2002 2003 2004 2005

China 904.2 948.1 947.6 1,016.2 1,112.4Italy 274.1 279.2 231.4 201.8 166.4US 147.8 139.7 113.0 113.7 116.8Brazil 83.7 99.5 102.7 121.0 110.5Vietnam 43.6 60.6 66.1 82.1 104.5Mexico 12.5 11.1 37.4 48.6 49.3India 33.9 33.3 30.3 31.0 34.4France 18.2 21.5 22.1 27.1 24.3Thailand 27.2 30.6 28.2 24.0 23.4Indonesia 48.2 48.3 36.5 23.9 23.2OTHERS 301.5 304.9 257.4 244.2 219.4TOTAL 1,894.8 1,976.9 1,872.6 1,933.7 1,984.8

(In million USD)

Derived from: http://www.intracen.org

Canadian Imports of Leather Products by Category

xxiii. Value of the Leather Imports by Canada in the Recent Past(In million USD)

Derived from: http://www.intracen.org

9.2 U.S. Trade Policy on Footwear and Leather Products

Trade and Tariffs

59

Category 2000 2001 2002 2003 2004

Finished Leather 4,647.0 4,138.8 3,861.2 3,484.3 3,798.3Leather Footwear 15,664.1 16,013.3 16,164.2 16,416.3 17,405.8Footwear Components 9,793.5 10,147.6 10,669.1 11,008.7 11,601.6Leather Garments 9,569.6 9,890.1 9,113.3 9,102.0 9,016.5Leather Goods 362.0 379.9 447.6 535.0 581.4Leather Accessories 595.3 636.1 692.6 675.7 765.7Raw Hide/Skin 205.5 196.3 173.2 159.3 184.0TOTAL 40,837.0 41,402.2 41,121.1 41,381.2 43,353.4

Category 2000 2001 2002 2003 2004

Finished Leather 1,081.3 969.5 929.6 905.0 940.6Leather Footwear 1,000.1 1,019.3 1,063.6 1,113.5 1,223.4Footwear Components 567.3 574.2 609.1 652.0 715.5Leather Garments 692.8 723.1 719.9 764.6 832.2Leather Goods 39.0 39.0 48.4 118.2 150.0Leather Accessories 64.3 63.6 63.8 70.1 78.0Raw Hide/Skin 113.4 107.0 109.4 104.1 95.7TOTAL 3,558.1 3,495.7 3,543.9 3,727.6 4,035.3

The footwear, leather, and leather goods sector is defined by footwear, its components,

leather goods, and travel goods. Footwear, leather, and leather goods accounted for

approximately D434,000 or 0.12 percent of total U.S. non-textile industrial exports to

Oman in 2003. Top U.S. exports in the sector are metal toecap footwear and travel cases.

Oman applies a 5 percent tariff on footwear, leather, and travel goods that enter the

country. Oman did not export any footwear, leather, or travel goods to the United States

in 2003.

The United States applies tariffs of 0 to 58 percent on products in this sector, with the

highest effective tariffs on rubber footwear. The average applied tariff for footwear,

leather and leather goods is 16 percent.

Tariff Elimination

The U.S.-Oman FTA will eliminate all industrial tariffs in the United States and Oman

within 10 years of implementation. Tariffs will be phased out according to three tariff

elimination categories: 1) immediate elimination, 2) equal cuts over 5 years, and 3) equal

cuts over 10 years

Footwear

Currently, the United States grants 14 percent of footwear products duty-free treatment.

Upon implementation of the agreement, the United States will grant duty-free treatment

for an additional 71 percent of footwear products from Oman. The United States will

phase out the remaining tariffs on seventeen rubber footwear products over the course of

ten years Oman currently applies a 5 percent tariff on 100 percent of footwear products.

Upon implementation of the agreement Oman will grant 100 percent of imports of

footwear products from the United States duty free treatment immediately.

GAP ANALYSIS

10. Demand – Supply Gap

60

10.1 Calculation of the Net Imports of the North America

xxiv. Net Imports of Leather Products in North America(Figures in million USD)

10.2 Calculation of Net Exports from India to North America

xxv. Net Imports of Leather Products in North America(Figures in million USD

10.3 Demand -Supply Gap for Leather Trade with the USA

Citing at the chart below, we can observe that the Indian Leather exports have stagnated

over last five years. However, the share of India in the total US Leather imports has

increased over the last five years. But it is also obvious that the demand for leather

imports has been coming down for US in the analyzed period. In 2005, Indian Exports

would form almost a quarter of total US Imports in comparison to little over 20percent of

total US Leather imports in 2001.

61

Particulars Item 2001 2002 2003 2004 2005

Total Imports of US A 1,783.1 1,474.9 1,384.6 1,197.6 1,031.6Total Imports of Canada B 1,894.8 1,976.9 1,872.6 1,933.7 1,984.8Imports from Canada by US

C 19.2 15.6 13.1 11.3 9.1

Imports from US by Canada

D147.8 139.7 113.0 113.7 116.8

Net Imports of US E= (A-C) 1,763.9 1,459.3 1,371.5 1,186.3 1,022.5Net Imports of Canada F= (B-D) 1,635.3 1,335.2 1,271.6 1,083.9 914.8Net Imports E+F 3,399.2 2,794.5 2,643.1 2,270.2 1,937.3

Particulars 2000 2001 2002 2003 2004 2005

Total Exports to US 258.24 342.78 286.89 246.44 251.58 279.70Total Exports to Canada 21.42 26.66 27.81 24.81 25.59 28.19Net Exports 279.66 369.44 314.7 271.25 277.17 307.89

IV. Demand-Supply Gap with USA

10.4 Demand -Supply Gap for Leather Trade with Canada

Though the picture is self illustrative of the obvious point, It could be said that Canada

has a huge potential for Indian Leather exports. So far the Indian exports have been

around 1-2percent of the total Canadian Imports. Though the demand is being met by

other exporting countries like China and Italy, India has to strategies and create attractive

trade situation for Canada.

V. Demand-Supply Gap with Canada

62

10.5 Demand -Supply Gap for Indian Leather Trade with North

America

The demand for Leather Imports in the whole North American region (UAS and Canada)

has come down from close to USD 3500 million in 2001 to close to USD 2000 million by

2005. The share of Indian exports to North American region had been almost stagnated

over the last 5 years. So the share of Indian exports has increase from close to 14percent

in 2001 to around 17percent by 2005.

However, the Indian Leather Exports across the world had been gradually increasing in

the study period. There had always been negative correlation between total Indian

Leather Exports and the total North American Importing trends.

VI. Demand-Supply Gap with North America

63

SWOT ANALYSIS

11. Strengths and Weaknesses for Indian Leather Industry

11.1 Strengths

Raw Material Base

The raw material base in the country is enormous with a population of 212 million cattle,

96 million buffaloes, 144 million goat and 53 million sheep. According to the latest

census, India ranks first among the major livestock holding countries in the wood. These

four species provide the basic raw material for the leather industry.

The annual availability of 65 million pieces of hides and 170 million pieces of skin is the

main strength of the industry. Some varieties of goat, calf and sheep command premium

64

position in the world market considering their premium quality.

Technology

The up gradation of technology in the tanning sector meeting the international

environment standards, the capabilities in the design development of leather products

particularly of footwear and up gradation of machinery and preparedness to adopt to the

changing fashions and consumer requirements are some of the remarkable strengths of

Indian leather sector. A number of institutions such as CLRI, FDDI, NID,NIFT, etc. have

been set up to support the Indian industry in R&D; HRD, testing and quality control,

design and product development.

Employment and Wages are Down

The number of production employees working in the Leather Industries in 1996 declined

7.4percent to 9,169 and their overall wage bill declined 6.1percent from the previous

year. It should be noted that the Footwear Industry alone employed 68percent of the

production employees. The average annual wage per employee rose 1.4percent to

D20,627, (compared with D34,507 for all Manufacturing Industries). In terms of hourly

wages, this increase represents ten cents per hour. Employee’s hours paid also decreased

by 7percent during 1996, (compared to a decrease of 1.4percent for All Manufacturing).

The Leather Industries continue to have the second lowest hourly wage rate in the

manufacturing sector after the Clothing Industries.

According to the results for the monthly, the average hourly earnings for employees of

major group 17 fell 1.7percent during the 1997 period, to D11.31, and preliminary figures

for 1998 indicate that hourly wage levels will not have returned to 1996 levels for hourly

paid workers in the Leather Group by year-end. During 1997 the number of hourly paid

employees increased 2.2percent.

Availability of Low Cost, Skilled Labour

India’s advantage as a source of low cost, skilled labour is quite relevant to industries

such as manufacturing of leather goods and footwear that are relatively labour intensive.

India has among the lowest cost of labour among key footwear producing countries. In

addition to low costs, India also has the world’s largest technically trained manpower in

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leather craft. The twin advantages of low cost and technical skills offer India a distinct

competitive advantage in this industry.

Availability of Raw Materials

India is the largest livestock holding country with 21 per cent of the large animals and 11

per cent of small animals in the world. The large population of cattle, buffaloes, goat and

sheep that the country possesses ensures that India has ten per cent of the world’s raw

material base. In addition, some of the leather available in India is premium quality and

much sought after.

Availability of Supporting Institutions

India has institutions that support the leather industry in specific areas such as product

development, design and R&D. These institutions enable capability building in the

industry and help it become globally competitive.

Product Development/ Design

A design development centre for leather garments and leather accessories is underway

under the joint efforts of the Council for Leather Exports and the National Institute of

Fashion Technology (NIFT). The design development centre functions from the NIFT

campus in New Delhi.

Research and Development Capabilities

The Central Leather Research Institute (CLRI) (is the world’s largest leather research

institute. CLRI today, is a central hub in Indian leather sector with direct roles in

education, research, training, testing, designing, forecasting, planning, social

empowerment and leading in science and technology relating to leather. State-of-art

facilities in CLRI support innovation in leather processing, creative designing of leather

products and development of novel environmental technologies for the leather sector.

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11.2 Weakness

Prices are on Rise

If the average increase (3.2percent) in price, during 1996, for commodities of major

group 17 is taken into account by using constant dollars, calculated using the I

(1992=100), the real decrease in shipments during 1996 would have been 6.9percent (as

opposed to the 3.8percent decrease in current dollars). The increase in price was slightly

less during 1997, only 2.8percent. The gap between the current and constant dollar prices

has widened through the 1990s (see, as prices for leather products have continued to

increase. Price increases have been particularly noticeable for leather footwear, which

averaged real increases of 6percent in 1996 and 3percent in 1997.

Lack of warehousing support from the government

International price fluctuation

Lack of strong presence in the global fashion market

Unawareness of international standards by many players

12. Opportunities and Threats in the Global Leather Industry,

Especially in North America

12.1 Opportunities

Large Domestic Market

India has a large and growing consuming class (with an annual income of USD 449 or

above), that constitutes the largest segment of the population today. This segment is

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estimated to constitute nearly 90 million households by 2006-07, up from just 32.5

million households in 1997-98 – a CAGR of over 12 per cent. Coupled with relatively

lower penetration levels - penetration levels for footwear has been estimated to be about

60 per cent – this represents a large and growing market for leather goods.

Government Regulation & Support

The Government of India has announced various initiatives to make the leather industry

more competitive. Key policy initiatives include:

De-licensing of integrated tanneries that convert raw hides and skins into finished

leather.

Several leather goods have been de-reserved from the Small Scale sector.

Free import of raw hides & skins, semi-finished and finished leather.

Concessional duty on imported machinery and chemicals.

Free export of raw hides & skins, semi-finished and finished leather and leather

products.

Policies to facilitate modernization / up gradation: In June 2005 the government

initiated a USD 64 million ‘modernizing scheme’ called the ‘Integrated Leather

Development Programme’, whereby all leather tanning and product units will be eligible

for modernization assistance. The assistance will be to the extent of 30 per cent of project

cost for SSI units and 20 per cent for non-SSI units, subject to a ceiling of USD 110

thousand per unit.

Setting up of leather parks: An outlay of USD 24.5 million for setting up five

leather parks — two in Chennai and one each in Nellore, Agra and Kolkata. 12 The

Council for Leather Exports has estimated that this scheme will generate a total

investment of USD 267 million in about three years

Establishment of ‘design centers’ at individual manufacturing units, to facilitate

improvement in design capabilities: Under this scheme, 25 per cent of the project cost is

provided to the units under the market access initiative scheme of the Ministry of

Commerce and Industry. Several individual units have come forward to establish their

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own design centers

Licensing Policy

After the de-reservation of 11 items in the leather sector, which include semi-finished

hides and skins, leather shoes, leather washers and laces, moulded rubber soles and heels

for footwear, flexible polyurethane foam, polyurethane shoe soles, shoe-tacks & eyelets

and leather pickers and other leather accessories for textile industry, vide Notification No.

SO 603(E) dated 29 June, 2001; no Industrial License is required to manufacture most of

the items of the leather industry. The location of industrial projects will, however, be

subject to central or state environmental laws or regulations including local zoning and

land use laws and regulations.

Some of the items of the leather industry, viz. leather shoe uppers (closed), leather

sandals and chappals, leather garments, industrial leather gloves, leather suitcase and

travel goods, leather purses and hand bag, fancy leather goods and novelty items, watch

straps and leather straps of all types are still reserved for exclusive manufacture by the

small scale sector. Small scale sector units are defined in terms of investment in plant and

machinery. Non-small scale units can manufacture these items after obtaining industrial

license, which is granted subject to an export obligation of 50 per cent of the production

each year.

Future Prospects

The world trade in leather products is growing in view of the increasing demand

for products made of leather.

The domestic demand is also expected to rise with the growing GDP, and

consumption pattern particularly for products like footwear, leather goods.

The developed countries have lost the competitiveness and they depend on

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imports for meeting their requirements from developing countries like India.

The leather sector in India is geared to meet the higher end consumer markets by

upgrading technology and machinery.

The Government of India plays proactive role to enhance export of leather

products considering the industry's inherent strengths and prospects.

Keeping in view the past performance and the current trend, the export

projections for the next five years were made. Accordingly, India's export is expected to

reach a level of USD 3.6 billion by 2006, envisaging 5percent share of global trade.

12.2 Threats

Major part of the industry is unorganized

Limited scope for mobilizing funds through private placements and public issues

(many businesses are family-owned)

Difficulty in obtaining bank loans resulting in high cost of private borrowing

Stricter international standards

High competition from East European countries and other Asian countries

Lack of communication facilities and skills

The Leather and Allied Products Major Group has faced aggressive global competition

from offshore footwear producers for decades. This competition became so intense

during the late 1960s that cases against Asian producers from countries such as Taiwan

and Korea were brought before the Anti-Dumping Tribunal.

In 1977, again as a result of successful cases from the Canadian Anti-Dumping Tribunal,

the Footwear Industry lobbied and was granted a protective system of global quotas. In

1977, the quotas began to be phased in, and they lasted until the last one was removed at

the end of 1988. The peak year for domestic footwear shipments was 1981, when the

value of manufacturing shipments for the Footwear Industry reached USD 1.1 billion.

The quotas helped postpone the takeover of much of the Canadian footwear market by

foreign producers In 1990, for the first time, the value of imports of footwear surpassed

the value of manufacturing shipments and the proportion of the Canadian market supplied

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by imports has been increasing ever since.

Conclusion

The second half of the 1990s has turned out to be a period of volatility for the Leather

and Allied Products Industries in general and the Footwear Industry in particular. With

stable demand for winter snow boots, and work and utility boots, the picture has

brightened for 2004. While market expansion occurred in 2004, Canadian leather

products manufacturers have not particularly benefited, because demand for imported

products have also expanded. Although the current low value of the Canadian dollar has

helped Canadian producers to increase exports, the costs of imported raw materials have

also increased prices (particularly for footwear) for Canadian consumers and dampened

domestic demand. With the Canadian dollar at even lower levels during 2000, it remains

to be seen whether demand for less expensive Canadian exports to other countries will

increase enough to overcome weak domestic demand.

Majority of the industry is unorganized

Limited scope for mobilizing funds through private placements and public issues

(many businesses are family-owned)

Difficulty in obtaining bank loans resulting in high cost of private borrowing

Stricter international standards

High competition from East European countries and other Asian countries

Lack of communication facilities and skills

12.3 MAJOR COMPETITORS

CHINA

China is the major competitor to Indian leather industry. China produces almost

40percent of the world leather products. Chinese leather goods like footwear, bags and

leather garments are the threats for the Indian exporters, because Chinese goods are of

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good quality and also the cheapest in the market. In case of north America, both USA &

Canada, Chinese goods are very cheap in comparison with the other countries.

ITALY

Italy is the second largest exporter of the leather goods to USA & Canada.

BRAZIL

BRAZIL is also a major exporter of leather goods to USA & Canada.

RECOMMENDATIONS

Indian leather goods manufacturers should be aware of the price of the Chinese

goods which is cheaper and have a better quality. Therefore Indian industry needs to

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adopt the more scientific technology and international design to decrease the cost and

increase the demand.

The yield from the Indian Slaughter houses should be maximized so as to increase

the overall productivity, for this purpose the commerce department should introduce

some special incentives for the slaughter houses and educate the farmers on the advanced

recovery techniques.

The Ministry of Commerce should put social education programmes in place to

tell the farmers and public at large that the Indian Leather Industry should be looked at as

an ‘Economic activity’ rather than a ‘Social Stigma’

Our small scale industries that form the major chunk of the Indian Leather

Industry need to be more focused on the export oriented production.

Exporters should also be encouraged, especially small exporters, by providing

them easy loans, by simplifying the export procedures and introducing SEZ for leather

exports.

The Govt. bodies like 'council for leather export' should setup warehouse in

foreign for encountering with unforeseen host nation problems.

India should also consider introduction of transit warehousing and re-exporting

facilities for Leather Industry to give it quick boost.

In the North American region, Canada should be seen as a potential market for

Indian Leather products.

CONCLUSION

Findings

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India accounts for 17 % of the total leather imports of USA and Canada together in 2005.

The demand for Leather Imports in the whole North American region (USA and Canada)

has come down from close to USD 3500 million in 2001 to close to USD 2000 million by

2005. So the share of Indian exports has increase from close to 14percent in 2001 to

around 17percent by 2005.

So This Proves Our Hypothesis That:

“India is one of the major exporters of leather and leather goods to North-American

countries”.

Conclusion

So I accept the “Null Hypothesis” and conclude that India is one of the major

exporters of leather and leather goods to North-American countries.

Other Conclusions

1) The key markets for leather products exported from India are Germany, UK, USA

and Italy, which together consume about 49 per cent of Indian exports.

2) In terms of product category, leather footwear, finished leather and leather goods

together account for over 75 per cent of exports.

3) India's export growth rate is 6.88percent during last five years.

4) U.S. imports of apparel increased in 2004, reflecting a continued trend by retailers

and apparel companies increasingly to source from lower-cost offshore providers and the

growth in the U.S. economy, which boosted consumer confidence and disposable income.

5) China is the largest foreign' supplier of textiles, apparel, and footwear, accounting

for 20 percent of U.S. textile and apparel imports and 69 percent of U.S. footwear

imports in 2004 by value. U.S. imports of textiles and apparel from China rose

significantly in 2004, particularly in articles for which it became eligible for quota

elimination in 2002.

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6) Consumer spending on footwear rose in 2004 by 7 percent, and the average price

of U.S. footwear continued to fall as lower-price casual shoes contributed to ongoing

price deflation.

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BIBLIOGRAPHY

http://dir.indiamart.com

http://www.indianleatherportal.com

http://www.census.gov

http://strategis.ic.gc.ca

http://www.ita.doc.gov

www.fas.usda.gov

http://www.trade.gov

http://www.indiainbusiness.nic.in

http://www.ficci.com

http://www.freeindia.org/at_a_glance/page3.htm

http://.¥ww.tdctrade.com

http://www.ibef.org

http://civilaviation.nic.in

http://www.indiacore.com

http://www.tradeportalindia.com/

http://www.whitehouse.gov

http://www.leatherindia.org/

http://www.intracen.org

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Appendix

Questionnaire

SAMPLE QUESTIONNAIRE

Dear respondent,

In order to be able to conduct my research study on the Indian Leather Exports to North

America, I have prepared this questionnaire and would appreciate it, if you could share

your views.

Thank you for sparing your valuable time.

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Demographic Details:

Name:

Address:

Age:

Occupation:

Q1. Are you employed with an export firm?

Yes [ ] No [ ]

Q2. Do you have an export business of your own?

Yes [ ] No [ ]

Q3. Do you deal in leather products?

Yes [ ] No [ ]

Q4. Rank the strengths of the Indian Leather Industry:

Raw material availability [ ]

Manpower [ ]

Low Labour cost [ ]

Non quota item [ ]

Q5. What kind of leather products do you deal in?

Footwear [ ]

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garments [ ]

Handbags /Purses [ ]

Luggage/Flat products [ ]

Accessories [ ]

Others [ ]

If, you deal in Leather garments then please continue.

Q6. List the kind of leather garments do you export?

Q7. How many pieces do you manufacture per day?

20-30 [ ]

40-50 [ ]

50-60 [ ]

60 and above. [ ]

Q8. Do you have an inhouse tannery ?

Yes [ ] No [ ]

Q9. I believe that a leather garment is just worn as a symbol of status ?

Strongly agree [ ]

Agree [ ]

Neutral [ ]

Disagree [ ]

Strongly Disagree [ ]

Q10. Do you export leather garments to the North America?

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Yes [ ] No [ ]

Q11. Briefly state the reasons for choosing North America?

80