Agra’s footwear industries: A heritage that contributes to India’s economy
The hub of footwear manufacture in India since Mughal era, Agra is slowly losing in edge to more business-friendly ecosystems […]
Anushruti Singh January 7, 2019
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The hub of footwear manufacture in India since Mughal era, Agra is slowly losing in edge to more business-friendly ecosystems in neighbouring states, not very effective implementation of the central Government’s MSME policies, the Taj trapezium, and exports from China. With its army of highly skilled leather processing and footwear manufacturing workers and artisans, Agra still accounts for 65 per cent and 28 per cent of all domestic consumption and export of footwear, respectively, but the city’s ease of business doing ranking has slipped to the current 14, from 10 in 2015. “Shoe making started (in Agra) in the Mughal era with leather mushaks which were used to carry hing, converting it into shoes,” we were informed by Puran Dawar, Chairman, Dawar Footwear Industries, and President, Agra Footwear Manufacturers and Exporters Chamber (AFMEC). He also told us that it was from the 1960s and 1980s that the city’s footwear industries flourished the most, thanks primarily to footwear exports to the erstwhile Soviet Union. According to conservative estimates, 13 per cent of all shoe trade in Agra in 1963 was with Russia and its satellite countries. Shoe exports to the Soviet Union in the early 1980s was worth ₹1,200 crores from the 150 odd shoe exporters in Agra. It was after the fall of the Soviet Union that the decline started and other factors that followed, such as the Taj Trapezium, added to the worrisome slowing down of the industry’s growth. Currently, industry watchers say that Agra’s leather and footwear industries need help more sooner than later. According to our sources in the industry, Agra is still one of the biggest clusters in the footwear sector in India among Kolkata, Kanpur and Chennai. “There are around 10,000 micro-size units; 150 small-scale industry units; around 30 medium-scale units; and, around 15 large-scale units in the city,” says Dawar. He also added that, currently, more than 2 lakh pairs are manufactured in the city everyday day and there are over 3.5 lakh people employed in the footwear segment in Agra. Agra’s huge potential to impact the global footwear market has been recognized by the government, which released a special package of ₹2600 crore last year for implementing its Indian Footwear, Leather & Accessories Development Programme. In tandem, MSME Development Institutes are working on imparting business and technical knowledge of the sector to already-existing entrepreneurs as well as those who want to work in this sector.
A 2016 ICRA report on the Indian footwear sector confirms the trend. The report says that appreciation in Rupee value against major currencies; regulations and restrictions on slaughter houses and tanneries that impacted availability of raw material; and reforms such as demonetisation and GST have had adverse effects on the sector. The report also stated current consumer trends shifting away from traditionally made shoes to global brands. ICRA figures show a decline for two consecutive years by ~9 per cent in FY16 and ~5 per cent in FY17. Further in April–June 2017–2018, the overall export in leather footwear and leather goods dipped by 4.89 per cent when compared to April–June 16–17 cycle. Despite many government initiatives and budget notifications for the sector, footwear manufacturers and exporters think that a lot still remains to be done. Dawar underscored the importance of putting a single-window system in place. He says that the sector in Uttar Pradesh is not getting much benefits from the much-touted initiatives. “The initiatives for the sector are totally on paper. Single window system is not effective at all for us,” according to him. Footwear manufacturers are also questioning the ambitious target of $10 billion in export revenues by 2024–25 at the time when government has shut down many (unauthorised) tanneries and the many footwear factories in the Taj Trapezium Zone (TTZ) have been sealed. “Tanneries are banned in TTZ and manufacturers are facing issues in procuring raw hides. Due to this, manufacturing is suffering and resulting in the decreasing trend in the exports,” Singh told us. Another challenge which manufacturers are facing is rising capital costs, which small manufacturers cannot easily bear on account of the high interest rates on commercial loans which are in the range 9%–14%. “Capital cost is really high in India. Other countries in spite of the best of the infrastructure compare to us are funded at 2%–3%. But here interest rates are quite high which is sometimes unaffordable for small manufacturers” says Singh. “We can’t compete fairly even in in-house clusters when there is a gap of supply on the raw material front. That’s why small manufacturers are moving rapidly towards synthetic leather manufacturing,” says one shoe manufacturers in Agra, on conditions of anonymity. For countering the issue of raw material unavailability, Dawar say the two measures that will be effective are: (i) An effective single-window system; (ii) Independent compliance audits.
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