INTERNATIONAL ECONOMICS

Analysis of trade of leather goods between

India and Italy

GROUP 5
Amit (3A)
Garima Kashyap (10A)
Nitin Sachdeva (19A)
Rupesh Agarwal (33A)
Shobit Razdan (36A)
Brief Introduction 2

Leather industry both in India and Italy is centuries old

One of the key component of trade for both countries
Leather trade primarily done in two forms
Raw Hides & Skins (HS Code 41)
Articles of Leather (HS Code 42)
Leather based foot wear (HS Code 6403)
Trade Statistics in % share of world trade is as follows -
HS Code HS 41 HS 42 HS 6403
Country Export Import Export Import Export Import
India 3.5% 2.3% 3.2% 0.5% 4.5% <0.2%
Italy 16.6% 12.5% 11.1% 4.6% 2% 6%
Brief Introduction 3

Trade w.r.t. India (in Million USD) HS41 HS42 HS 6403

Export To Italy 130 112 127
Import From Italy 15 80 8

India is having positive trade balance with Italy in leather goods

India exports both raw material and finished goods to Italy
Italy trade is more concentrated towards finished goods of leather
Majority of items (HS42) India exports to Italy are leather shoes,
accessories, bags and other lost cost items
Items imported by India (HS42) are high end leather based fashion
items
Indian Leather Industry 4

India is having largest available livestock in world. However it has

share of only 3.5% in worlds export.
Leather industry enterprises are continuously influenced by the
social, cultural, technological, political and legal changes around
them on both strategic and tactical terms.
Unorganized sector fulfill needs of local customers, while organized
sectors fulfill needs of local as well as export requirements.
Skill of manufacturing designer goods are primarily family controlled
and transferred from one generation to another Trend shifted
towards big corporates employing latest available machinery.
Technological base in design, manufacturing and processing is
under developed in comparison to that of Italys.
Italys Leather industry 5

Largest in EU for both export and import

Known for its quality leather and artisan work
Supported by capital investment and advanced industry both in
leather processing and making finished goods e.g. garments
Livestock resources are scarce in Italy, but it is still a leader in export
of raw leather processing (procured from EU countries) and
exporting finished goods
With its highly advanced tanning industry, modern accessory
manufacturers and innovative designs, as well as high quality,
branded products representing the latest fashion; Italy refers to
upper income groups of the world
One of the countries leading the world fashion in leather apparel
India Italy Cooperation 6

Bringing the successful cluster model of Italian companies to Indian

companies
Disseminating the best practices from Italy to Indian enterprises
Creating awareness on latest technology advances
Development of subcontracting and partnership exchange for
better capacity utilization, promotion of trade and business
partnerships
Challenges Indian Leather Trade 7

Increased cost of production per unit area of finished leather due to

stringent environmental norms
Low level of technology in small tanneries
Poor capacity utilization in most tanneries leading higher financial
cost and overheads
Varying levels of technology in the factories depends on size of
factories
Stagnation in footwear production capacity and higher tax rate
w.r.t. apparels
Non availability of fashion design houses concentrating on leather
garments
Comparative Advantage Indian 8

Leather Industry
Global leather firms are shifting manufacturing bases to developing
countries because of high wage levels and strict environment
norms, this is in favor of Indias leather trade and is evident from
India Italy trade data
Indias advantage of low cost skilled labor is quite relevant to labor
intensive manufacturing of leather goods and footwear
Availability of abundant raw material, production and processing
know-how is helping Indias trade
Presence of support industry like leather chemicals
Foot wear industry in environment and power friendly and leather
constitutes 20% of total footwear sector.
Strengthening of Comparative 9

Advantage
India focus is on leather processing which is evident from numerous
institutes in this area, for e.g. The Central leather Research Institute
(CLRI) Worlds largest research institute in leather technology
The GoI has also supported India leather industry and is evident from
following initiatives
Concessional duty on imported machinery and chemicals.
Free export and import of raw hides & skins, semi-finished and finished
leather.
The design development center at NIFT campus in New Delhi An
initiative to build design of leather garments
Footwear, Leather & Accessories sector is amongst 25 priority sectors under
Make In India
Challenges Italian Leather Trade 10

Costly labor
Pressure from environmental support lobby and PETA against use of
leather for personal goods
Many non-EU countries maintain export bans and restrictions for raw
hides and skins
Strict environment protection laws increasing cost of leather
tanneries and in turn cost of end product
Challenge from dumping by China of cheap leather products
Comparative Advantage Italian 11

Leather Industry
Italy is considered as one of the best country to have designer
goods. Brands like Gucci and Prada are world renowned for there
designs
Italy's leather-making industry banks on quality, innovation and lean
manufacturing to beat low-cost competitors.
Italy has worked on cluster model for leather industry Providing
resources at one place Helps in reducing cost
Automation has helped manufacturers to improve quality and Yield
Presence of strong base of manufacturers of machinery used for
leather goods
Well established tanneries cater to 70% of EU
Strengthening of Comparative 12

Advantage
India focus is on leather processing which is evident from numerous
institutes in this area, for e.g. The Central leather Research Institute
(CLRI) Worlds largest research institute in leather technology
The GoI has also supported India leather industry and is evident from
following initiatives
Concessional duty on imported machinery and chemicals.
Free export and import of raw hides & skins, semi-finished and finished
leather.
The design development center at NIFT campus in New Delhi An
initiative to build design of leather garments
Footwear, Leather & Accessories sector is amongst 25 priority sectors under
Make In India