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Leather Industry Hit By Rupee Volatility
Analysts have observed that the recent appreciation in rupee against the US dollar
has posed a serious threat to the competitiveness of Indian leather industry in the recent past.Representatives of the leather trade bodies such as the Indian Finished Leather Manufactures and Exporters Association (IFLMEA) and the Council of Leather Exports (CLE) have expressed concern over the losses incurred by SME leather exporters on account of strengthening rupee against the dollar.
Volatility of rupee against the US dollar has weakened margins of the small-scale leather exporters, thereby putting tremendous pressure on the growth of the Indian leather sector, said Arvind Bangad, proprietor of Euro Line, a small leather bag store in Ahmedabad.
The rupee volatility has only added to the woes of the SME leather units, which were already suffering due to the global economic slowdown, thereby resulting in demand decline, fall in order book and poor capacity utilisation.
Besides the support extended by the Government of China to its leather export sector, the chief competitor of the Indian leather industry, in the form of 17% export value-added tax (VAT) rebate has also dealt a severe blow to SME leather exporters in India.
Leather products manufactured by Indian SMEs are rapidly losing out to the Chinese leather exporters as the VAT rebate and subsidies offered to thelatter are making them more competitive, said Nausheen Ali, proprietor of Shaheen Leathers, a small-scale leather shop in Kolkata.
Given the situation, industry players have sought support from the Indian government and have called for extension of subsidies and demanded a stimulus package for the sector.
Mukhtar-ul-Amin, president of CLE, has demanded that export volumes be allowed to hedge against currency fluctuations because most of the SMEs engaged in the sector fail to hedge due to various shortcomings.
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