Analysing The Leather Industry In India Business Essay
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Published: Mon, 5 Dec 2016
The leather industry is a major contributor to world economy in terms of its potential to offer employment opportunities, income generation and the export benefits. The Indians have largely benefited from the leather industry for decades, which makes it one of the most prominent industries. The past five decades five years saw the Indian leather industry undergoing through a complete change which has made it the leading foreign exchange earner. The major areas of the leather industry include; the leather process technology, treatment of the effluent, the leather chemicals, designing of leather products and standardization of quality, and value addition to the byproducts. The Indian leather industry enjoys a good market for leather goods and accessories from the U.S.A, U.K and Germany which are amongst the world’s great economies.
The leather products have a global value which forms a strong trade component for the value chain of the leather products. The raw materials which are hides can be bought from one country, for instance South America and processed in India while the end products can be sold in USA. Therefore this is a global industry, the leather industry in India production is estimated to be 10 million tones which are 6% of the world’s total production, India on its part constitutes 2.3% of the world total share in the leather industry products trade, and this is roughly US $ 68 billion, Italy leads followed by China, USA and Korea respectively.
However, the leather industry is one of the world’s most fragmented industries with several forces at play. It faces serious problems that include; Non availability of the raw materials and the rising environmental pressure for the consciousness for the eco-friendly products.
The lack of enough raw materials is major force that undermines the tanning and finishing capacity of the of the Indian leather industry which is estimated to be a total of 1192 million pieces of hides per year, this shows the capability of India to maintain its large leather industry as a resource, the only drawback is the lack of availability of raw materials and the emerging high rate of the population growth (Leather.Indiabizclub, 2010). This trend of the forces if not checked for balance in the next three years will have a detrimental effect in the Indian economy. To avoid the incapacitation of the Indian leather industry, the Indian Government has come up with a strategy to augment the domestic availability of the raw materials, it has allowed for the duty free importation of the hides and skins at the world wide level.
In order to counter the forces due to the rising demands for the eco-friendly product inputs the Indian Government through the regulatory agencies has set the required standards for leather products. It has also initiated the policies that streamline the leather industry by instilling a culture of value addition to the industrial by products and routine treatment of the industrial effluents. These standards ensures that the Indian leather manufacturers produce the most environmentally friendly products that will gain the advantage of the leather products market base especially in the European countries which emphasizes on the environmental soundness of the products through the increased role in the environmental regulations. According to the European Market regulations the manufacturers should view the production processes and products in terms of the effects to the environment. (Jones & George, 2004). Therefore, countering of the forces due to the environmental awareness creates sound environmental production which consequently opens the marketing opportunities especially for leather products.
The Raw Material Supply
The Indian leather industry has a large raw material base, India as a country has been ranked amongst the leading countries in terms of livestock holding and hence the raw materials for the leather industry. The four types of hides from the livestock species such as the cattle, buffaloes, goats, and sheep’s have high value in the leather industry. The specialty that has been accorded to the goat, calf and the sheep skins from India allows them to command a good market worldwide. The Indian Government has put in place strategies to meet the demand for the leather industry raw materials, by allowing the duty free importation of the raw materials from any part of the world. These strategies facilitates and attracts foreign manufacturers that intends to shift the production bases from very high production cost locations to low base such as those encouraged in India.
Forces at play
There are several forces at play, the Indian leather industry has revolutionized very dramatic transformation since the government initiated its policies in the late 20th century, this enabled the Indian leather industry to grow from a mere exporter of the leather raw materials in the mid 20th century to manufacturer’s of finished products which have high value addition. Due to the efforts of globalization of the Indian economy under the support of economic liberalization and initiation of viable economic policies, the Indian leather industry is set to achieve the highest growth record within the next 3 years. This will enable the Indian economy to achieve the greatest share in the global trade.
Other evident economic forces emanating from the Indian leather industry include; its role as a foreign exchange earner and its tremendous employment potential for the next three years. The Indian leather industry offers employment to over 2 million Indians both direct and indirect, with almost 50% of the workforce comprising of the skilled and semi-skilled workers.
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