Team siliconindia

• US tariffs have led to order cancellations and factory shutdowns in India’s leather sector.
• Export volumes to the US are expected to drop by 13-14% this fiscal year.
• Indian leather industry revenue may decline 10-12% due to steep tariffs.

India’s leather industry is facing a tough year ahead as new US tariffs weigh heavily on exports. According to a Crisil Ratings report, the 50% tariffs imposed by the US are causing order cancellations and shutdowns, especially impacting small tanneries that primarily serve the US market.

The Indian leather and allied products sector, worth Rs 56,000 crore, relies on exports for about 70% of its revenue. The US market alone accounts for 22% of this, while the European Union makes up over half. However, recent US duties, a 25% reciprocal tariff plus an additional 25% penalty related to India’s Russian oil imports, have made Indian exports less competitive compared to countries like Vietnam, Italy, Cambodia, and France, which face lower US tariffs of 15-20%.

Jayashree Nandakumar, Director at Crisil Ratings, explains that exports to the US are expected to fall 13-14% this fiscal year, with revenue hit even harder. This is because most US-bound shipments are finished leather products like shoes and accessories, which earn higher prices. At roughly $14 per unit, these finished goods bring in 14-15% more revenue than the overall product mix. As a result, export revenue could decline by 14-16%, falling to between $3.9 billion and $4 billion.

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Despite strong demand within India, these export challenges pose a significant setback for the leather industry, especially smaller players reliant on the US market.