The Indian leather and allied products industry is bracing for a significant downturn, according to a recent projection by CRISIL Ratings. The industry, valued at ₹56,000 crore, may face a 10-12% revenue decline in FY26 due to the imposition of hefty US tariffs.

Impact of US Tariffs

The United States has imposed tariffs totaling 50% on Indian leather products, comprising:

• 25% reciprocal duty
• 25% penalty for India's Russian oil purchases

This move has severely impacted the industry, potentially leading to:

• Widespread order cancellations
• Production halts
• Expected 13-14% drop in export volumes
• Projected 14-16% fall in revenue to $3.9-4 billion

Export Market Breakdown

The Indian leather industry heavily relies on exports, with 70% of its revenue coming from international markets. The export landscape is dominated by two major regions:

Financial Implications

The industry may face significant financial challenges:

Stock Market Response

The impact of these developments is already visible in the stock market:

• Listed leather sector stocks have declined 9% in the past month
• A 21% drop has been observed over the past year

Potential Relief Measures

Despite the gloomy outlook, some relief measures are under consideration:

1. UK Free Trade Agreement
2. GST reduction on leather products from 18% to 12%
3. Lower GST on intermediate goods from 12% to 5%

Future Outlook

The industry's future trajectory will depend on several factors:

• Evolution of tariff structures
• Pace of market diversification
• Impact on European re-exports
• Foreign exchange volatility

As the Indian leather industry navigates these challenging waters, stakeholders will need to closely monitor these factors and adapt their strategies accordingly.

The Indian leather industry is facing severe headwinds as US tariffs imposed by the Trump administration continue to take their toll. The 50% tariff rate has led to the closure of at least 50 factories in Tamil Nadu's Ambur region, a key hub for leather production in India.

Export Figures and Market Share

India's leather and non-leather footwear exports reached $4.40 billion, with the US market accounting for $1.00 billion of this total. The impact is particularly pronounced in Tamil Nadu, where half of the state's leather exports are destined for the United States. Tamil Nadu, along with Agra and Kanpur, collectively represents 70% of Indian leather exports to America, primarily consisting of belts, bags, shoes, and wallets.

Industry Challenges and Adaptations

The steep tariffs have forced the Indian leather industry to confront significant challenges:

1. Loss of Market Share: India is losing ground to competitors such as Vietnam, China, Indonesia, Bangladesh, and Mexico.

2. Relocation of Operations: Some tanneries are moving their operations to countries with lower tariff rates, including Vietnam and Bangladesh.

3. Material Shifts: Other manufacturers are adapting by switching to alternative materials to mitigate the impact of the tariffs.

4. Pricing Pressures: US buyers are demanding substantial discounts or reducing order volumes from Indian suppliers, further squeezing profit margins.

Regional Impact and Survival Strategies

While factories exporting to the US market face closure, those focusing on European markets remain operational. Europe imposes a comparatively lower tariff of 20% on leather goods, providing some relief to Indian exporters.

Industry Appeals for Government Support

The leather industry's representative bodies have not remained silent in the face of these challenges:

• The Council for Leather Exports and the Federation of Indian Export Organisations have appealed for government intervention.
• Their requests include the implementation of an interest equalization scheme, market access initiatives, and temporary export aid to prevent job losses.
• Discussions with Finance Minister Nirmala Sitharaman have taken place, though they have yielded limited results thus far.

Outlook

The situation remains critical for India's leather industry, particularly in Tamil Nadu. With nearly 100 tanneries facing closure, the sector is at a crossroads. The ability of the industry to adapt to these challenging market conditions and the potential for government support will be crucial in determining its future trajectory in the global leather market.

As the industry grapples with these tariff-induced challenges, the coming months will be critical in shaping the future of India's leather exports and the livelihoods of thousands employed in this sector.