‘Middle East war, US tariffs and local issues hurt leather Industry’

In an interview with Leather World News , Abdul Wahab, Regional Chairman (Southern Region) of Council for Leather Exports (CLE), said that the Middle East conflict has pushed up the cost of key oil-based materials very high, making it very expensive to manufacture goods in India. He also talked about how US trade taxes and policy investigations have hurt Indian exports, though he remains hopeful that a new trade deal with the US could help India reach $4 billion in exports to the American market by 2030–31.

Besides, Wahab also pointed to major challenges at home, such as expensive land, shoe-component makers being scattered across the country, limited worker productivity, and long visa delays for foreign technical experts. He suggested several steps to address these issues. While praising government schemes and recent duty-free trade deals, Wahab stressed that continued tax relief and policy support are essential to reach the goal of $14 billion in exports and $50 billion in total sales by 2030. Excerpts of the interview:

Q1. What are the key export-related challenges currently facing India’s leather and footwear sector on account of global crises and tariff measures?

A: On the export front, the current challenges faced are on account of the West Asia Crisis and the threat of US tariffs. The leather and footwear industry uses many petro-based inputs and raw materials for making finished leather, leather products, and footwear. On account of the West Asia Crisis, not only has the supply of these petro-based inputs been affected, but there is also a steep price escalation in the range of 40% to 60%, resulting in a substantial increase in production costs to the extent of 30%. Overseas buyers are not willing to increase prices, on account of which exporters are facing financial stress. While the Government has provided import duty exemption for certain chemicals used in making finished leather and components till June 2026, this exemption has not been extended to many critical inputs, namely PU coated fabrics, finished & crust leather, metal accessories, footwear components, non-woven fabrics, etc. It is requested that the Government provide import duty exemption for these inputs as well, at least for the next 5-6 months.

As far as the US is concerned, it is the largest importing country of leather, leather products, and footwear exported from India. Exports to this market grew substantially from USD 645.03 million in 2020-21 to USD 1045.27 million in 2024-25. However, the levy of a 50% reciprocal tariff affected these exports. While that rate was subsequently reduced following trade adjustments in early 2026, the US office of the USTR replaced temporary measures with a new 10% Section 301 tariff on covered Indian goods, avoiding the higher 12.5% tier imposed on several competing economies. On account of these prolonged trade tensions and tariff fluctuations, exports to the USA declined to USD 975.88 million in 2025-26, registering a drop of 6.64%. It is hoped that a long-term bilateral trade agreement with the USA will be finalized soon, as the US market remains crucial for achieving India's target of enhancing leather and footwear exports to approximately USD 4 billion by 2030-31.

Q2. What structural, infrastructural, and skill-related constraints are impeding the growth of the domestic manufacturing ecosystem in the leather and footwear sector?

A: Beyond trade issues, the major domestic challenges faced by the industry include high land costs, an underdeveloped component ecosystem, labour productivity constraints, and visa friction for foreign technical expertise.

Firstly, land cost in India is very high and acts as a major deterrent in attracting investors. There is a need to develop a National Land Bank wherein details of all Government lands available at concessional rates for factory/company establishment, along with prices, can be provided.

Secondly, there is a need to significantly enhance the component manufacturing ecosystem in the country. Existing component manufacturers are scattered across the country rather than being located in manufacturing clusters, thereby increasing sourcing costs. Most components required for making value-added export products are currently imported. To overcome this dependence, the Government must support the development of mega clusters and micro clusters near all existing production clusters with a robust component ecosystem. Investors in such clusters should be provided with plug-and-play (ready-to-use) factories, which would considerably reduce raw material and logistics/local transport costs.

Thirdly, to enable the industry to overcome labour productivity constraints and hire skilled labour, the National Skill Development Corporation (NSDC) portal should contain details of skilled labour available for various job roles in the sector. Furthermore, institutions like CLRI & FDDI should develop training modules for workers on emerging technologies (such as Industry 4.0, Robotics, AI) and advise the industry on integrating such production systems into existing manufacturing processes.

Finally, during investment promotion shows in China, many Chinese entrepreneurs expressed interest in setting up production units in India. Additionally, Indian units employ Chinese technicians to oversee production and receive Quality Inspectors to inspect goods prior to dispatch. However, difficulty and delays in obtaining visas for these Chinese businessmen, technicians, entrepreneurs, and inspectors have become a significant barrier to the timely execution and shipment of export orders. An online visa system (e-business visa) should be implemented/extended to them to ensure smooth production and help reach the export target of USD 14 billion by 2030.

Q3. How do current duty and tax structures impact SEZs and non-SEZ manufacturers selling to the domestic market?

A: The existing duty framework creates operational disadvantages for units operating both inside and outside Special Economic Zones (SEZs) when selling to the domestic market.

Though duty-free import facilities for inputs, components, and machinery are available for units in SEZs, no such facility exists for investors/FDIs selling in the domestic market. To overcome scale disadvantages and bridge the technology gap, such duty-free import facilities should be extended to units selling in the domestic market for at least the first three years of operation, provided they generate employment for a minimum of 5,000 people.

Conversely, if a unit in an SEZ sells its product in the domestic market, it is subjected to full import duty on the finished product alongside applicable GST. Consequently, the actual cost of a product sold by an SEZ unit becomes higher compared to a Domestic Tariff Area (DTA) unit. Rather than charging full import duty on the finished product, only the duty incidence on inputs used in manufacturing should be charged. Furthermore, SEZ units suffer a disadvantage under Free Trade Agreements (FTAs). For instance, under ASEAN, a concessional import duty of 5% is granted on imports from competing countries like Vietnam, Thailand, and Indonesia, whereas an SEZ unit selling domestically must pay full customs duty. This anomaly needs to be addressed.

Q4. What is the historical evolution and current socio-economic contribution of India’s leather and footwear industry?

A: The industry has transformed from being a mere exporter of semi-finished leathers in the 1950s and 1960s to a leading exporter of value-added products today—a significant milestone achieved through continuous Government support.

Socio-economically, the leather and footwear sector is a labour-intensive industry providing employment to 4.42 million people, 40% of whom are women. It is an industry that creates ‘wealth from waste’ by making value-added products from hides and skins, which are by-products of the meat industry. By expanding its production facilities across rural and semi-urban areas, the sector plays a vital role in the socio-economic development of workers and regional clusters.

On account of these strong fundamentals and foundational support, the industry has achieved major international milestones. Today, India stands as the 2nd largest producer of footwear, the 2nd largest exporter of leather garments & saddlery & harness, and the 5th largest exporter of leather goods globally.

Q5. How have recent Government policies, schemes, and trade agreements helped propel growth in the sector?

A: The Government has consistently supported the industry across crucial areas such as marketing, capacity modernization, technology upgradation, skill development, environment management, and infrastructure development, enabling India to become a reliable supplier to global brands. The key government policy interventions and achievements include:

• Production & Investment Schemes: Schemes like ILDP (2012-17), IFLADP (2017-21), and IFLDP (2021-26) have transformed the national production landscape by facilitating major investments. Initiatives under "Make in India" drove product diversification into non-leather footwear, attracting proposed/committed investments of Rs. 12,000 crore in the non-leather segment alone while encouraging States to launch sector-specific policy packages.
  

• Marketing & Trade Missions: Over the last 12 years, the Government provided over Rs 83 crore in support under the Market Access Initiative Scheme (MAIS) to the Council for Leather Exports, funding over 200 export promotion events (fairs, BSMs, Reverse BSMs, trade delegations, and Investment Promotion Shows). The newly launched Export Promotion Mission (EPM) further offers comprehensive financial support in marketing, testing, warehousing, logistics, trade credit, and intelligence.
  

• Tanning & Input Relief: Strategic policy measures for tanners include the removal of 20% export duty on crust leather, 15% export duty on EI tanned leather, and the removal of port restrictions and inspections on exports of finished, wet blue, and EI tanned leathers. Exporters also benefit from duty-free imports of critical inputs under the Import of Goods under Concessional Rates of Duty (IGCR) Scheme.
  

• Free Trade Agreements (FTAs): Recent FTAs with the EU, UK, Australia, UAE, Oman, New Zealand, Mauritius, and EFTA offering 0% duty for leather, leather products, and footwear provide critical market access to support achieving the target of USD 14 billion in exports by 2030-31.

Q6. What specific operational and fiscal support measures does the industry require moving forward to hit its USD 50 billion turnover target?

A: In order to attract more investments and achieve the envisaged overall turnover target of USD 50 billion, the industry requires targeted policy and fiscal support measures in several critical areas:

• Scheme Continuation: Implementation of the FLOAT scheme or continuation of the IFLDP scheme for the next five years to attract domestic investments and FDI, establishing a complete domestic production ecosystem including component and machinery segments.
  

• Import Duty Relief: Import duty exemption for finished and crust leathers, which are critical raw materials derived from animal species not available in India. 
  

• IGCR Scheme Modifications: Inclusion of all types of PU material under the IGCR scheme by suitably updating product descriptions, alongside the removal of anti-dumping duties on imports made under IGCR.
  

• GST Rationalization: Extension of the concessional 5% GST rate to job work units for leather goods and footwear, bringing them at par with the tanning segment.

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