The Hindu Business Line : Leather industry feels the sting of strong rupee

Chennai May 29 The leather industry, which has sustained an annual export growth of about 15 per cent in 2006-07, could take a drastic hit in the current year due to the strengthening rupee, according to the Council for Leather Exports (CLE).

Briefing reporters after a review with representatives of the Council for Leather Exports, the Union Minister of State for Commerce, Mr Jairam Ramesh, said that the CLE has sought the Commerce Ministry's assistance in bringing down transaction cost to offset the impact of rupee's appreciation against the dollar.

Doubling Exports

The CLE had brought this up as its single largest concern. The Commerce Ministry would apprise the Finance Ministry of the industry's concern — a concern shared by exporters across industry segments, he said.

Lowering the transaction cost would have to be through enhancing drawback rates. The leather industry was now at a disadvantage compared with its competitors such as China and Vietnam, he said.

The leather industry's exports stood at $3.1 billion in 2006-07 against $2.7 billion in 2005-06. It was slightly off its target of $3.3 billion, which was needed to reach its long-term plan of doubling exports to $7 billion by 2010-11. The growth during the year has resulted in one-lakh new jobs. The industry hopes to generate over half a million new jobs by 2010-11 to employ a total of 2.2 million persons. The industry has been able to sustain a 15 per cent growth since 2003-04.

Sustaining Growth

Mr Habib Hussain, Vice-Chairman, Council for Leather Exports, said that the leather industry would soon feel the pinch of the strengthening rupee. While it would manage to sustain the growth in the first quarter of the current year, it could not hold out long. No industry can bear up to a 8 per cent change in currency value in a six-week period, he said. "The impact will be dramatic" when it happens, he said.

Mr Jairam Ramesh said the CLE is pushing for the development of the leather industry in Jammu and Kashmir, where sheep skin is available, and Bihar, a good source of raw hides. The CLE would meet in Srinagar in July to chalk out a plan to develop value added leather industries there.