West Asia Crisis: Leather and Footwear Industry Urges Duty Exemptions on Essential Inputs to Mitigate Impact

The leather and footwear industry has formally requested duty exemptions on critical inputs such as synthetic leather, metal accessories, machinery, threads, moulds, and certain chemicals. This request arises amid a dramatic increase in input costs by approximately 40-60% due to the ongoing geopolitical tensions in West Asia, particularly following the closure of the Strait of Hormuz by Iran, which has disrupted oil and gas shipments. These rising costs have impacted the production capabilities of domestic manufacturers, prompting industry leaders to engage with the commerce and industry ministry for support and relief measures. Moreover, the industry is advocating for the expedited implementation of the proposed FLOAT (Footwear and Leather Oriented Transformation) scheme that encompasses a comprehensive array of product lines, raw materials, and machinery.

The implications of these developments are significant for both consumers and the market at large. For the average citizen, higher input costs could translate into elevated prices for leather and footwear products, eroding purchasing power during a time when many households are economically strained. Additionally, if manufacturers are unable to sustain their operations or absorb rising costs, it could lead to job losses and reduced economic activity within the sector. Market dynamics also indicate that a slowdown in exports—evidenced by a year-on-year decline of 2.36% to $4.26 billion for leather and leather products—may further depress the industry’s profitability and stifle growth if corrective measures are not promptly implemented. Overall, the tension within input supply chains has created a challenging environment for stakeholders in the leather and footwear sector.

Looking ahead, the government and the Reserve Bank of India (RBI) may need to take proactive steps to stabilize the sector and mitigate the pressures created by international disruptions. Key next steps could involve evaluating the industry’s request for import duty exemptions as a means to facilitate cheaper access to essential raw materials and enhance domestic manufacturing. By endorsing initiatives like the FLOAT scheme, the government can stimulate innovation and competitiveness within the sector. Long-term, it may be prudent for policymakers to enhance local sourcing capabilities and invest in technological advancements within the industry, ensuring resilience against future external shocks while fortifying the supply chain. Such strategic measures could potentially reinvigorate the leather and footwear industry, positioning it for sustainable growth in the coming years.