Mera Joota Hindustani

Growing Opportunities for the Indian Footwear Industry

“There’s an awful lot you can tell about someone by their shoes.” ~ Forrest Gump (1994)

Through popular culture and media, shoes have come to be regarded as a status symbol. Whether it’s a classy pair of red-bottoms or a casual pair of crocs, first impressions are often formed with a simple glance at one’s feet. Across cultures, a new pair of shoes symbolise the beginning of a journey; but the journey of the shoe itself is one of great consequence.

India is the second largest producer of shoes globally, accounting for 13% of the entire world’s footwear production, second only to China. It is also the second largest consumer market for footwear, behind China (Nayyar, Chawla & Kohi, 2020). It is estimated that India exports roughly 130 million pairs of shoes every year, bringing in a revenue of $1786.45 million in 2019. India also ranks 8th in the manufacturing and distribution of footwear components such as soles of rubber, plastic, leather etc. The present pandemic has been the cause of substantial disturbance in the footwear industry. However, it has also provided India with some interesting opportunities.

Source: Trading Economics, Ministry of Commerce and Industry, India

The obvious reason for the losses suffered by the shoe industry was that people had nowhere to go. This not only facilitated a lesser need for new purchases, but also a reduction in the very supply of shoes. In addition to this, the pandemic increased the budget constraints of the average consumer due to shrinking disposable income. A large section of the footwear industry’s labour force (as in most Indian industries), which continues to be made up of rural migrants, returned to their native homes and villages during the early months of the pandemic. 

Shoes aren’t considered ‘essential’ items due to which shops and small retailers weren’t allowed to keep their physical stores open amidst the lockdown in India. Moreover, the shutting down of factories in China, considered to be the centre of the supply chain of the footwear industry, disrupted all subsequent manufacturing activities. There were also large scale cancellations of orders by American and European businesses, as observed across most apparel industries since the beginning of the pandemic.

Illustrated by Yash Batra

China has been the dominating player in the footwear industry by virtue of being the primary supplier of raw materials, as well as the largest manufacturer of and market for footwear itself. However, China’s share in the footwear industry has faced significant threat in the recent past from the rapidly growing Indian and Vietnamese manufacturing sectors. As the epicentre of the Coronavirus, the effect on the Chinese market has been multifold- along with the devastating impact on its labour force and supply chain, manufacturing and exports also came to a halt. This massive blow to the footwear industry in China also transpired at a time of growing anti-Chinese sentiments around the world, which were further deepened by the emergence of the virus. With nations looking to shift their manufacturing base, India gained the opportunity to present itself as the primary candidate.

Nonetheless, it must be noted that even though India possesses the labour force, its manufacturing sector does not possess the necessary finesse to properly contend with China. India’s productivity potential is hindered by the use of outdated machinery and technology, horizontal growth of leather tanneries, lack of organized manufacturers and many more such internal shortcomings. In order to present itself as a genuine alternative to the cheap and efficient Chinese manufacturing and output, India must look towards solid structural rejuvenation in these areas, a sentiment that was echoed in a virtual meet by the Confederation of Indian Footwear Industries (CIFI) earlier this year. The panellists reiterated the importance of revitalisation of the manufacturing process amidst the recent nationwide lockdown to make it better and more cost efficient.

The greatest problem faced by the Indian footwear industry is the skill of the labour force. While the demand for new and unique designs changes with trends, the number of institutes dedicated to footwear related training, studies and research remain very few. Unistar’s founder, Mr. H. S. Bahety, attributed this to be the primary reason for India’s inability to compete with China.

Some other suggestions for the economic stimulation of the industry include shifting the focus to the non-leather side of the industry. According to president of CIFI Raj Kumar Gupta, this change in prioritisation to non-leather footwear could decide the future of the footwear manufacturing industry of the nation, since about 86% of footwear purchased worldwide was of the non-leather variety (Future Footwear, 2020). Ramesh Dua of Relaxo footwear echoed these sentiments, and also emphasized the importance of investment in non-leather footwear technologies.

This process of revitalisation will also result in increasing employment as a consequence of increased productivity and output. N Mohan, executive director and CEO of Clarks said that for every 1000 pairs of shoes sold domestically, 425 employment opportunities can be created across manufacturing to retail (S. Kumar, 2020). Moreover, as per a report released by the Department of Industrial Policy and Promotion, the industry has the capacity to generate 250 jobs for every investment of Rs. 1 crore (Singh, 2020). 

Most recently, Germany-based ‘healthy footwear’ brand Von Wellx, has shared its plan to set up a new manufacturing unit in Uttar Pradesh, with a production capacity of over three million pairs. The owner of the brand Casa Everz GmbH said that the company “chose India over other locations since it believes that India is going to be the next manufacturing powerhouse of the world if it is well supported by business conducive governmental policies.” (Business Insider India, 2020) This is expected to create about 10,000 direct and indirect jobs.

Given everything, it’s hard to say what the immediate future for the footwear industry will look like, though some general inferences and observations can be made. It is estimated that the average selling price will greatly reduce, in order to clear out the accumulated inventory. The net profit margin is thus, also expected to face a sharp dip. However, it seems as though the leading producers of the industry have little to worry about. The panellists of the aforementioned virtual meet of the CIFI agreed that the business will be able to recover in three-four months after the lockdown is lifted and stabilize in six-eight months time. But the question remains- will India be able to seize this opportunity and dethrone China as the world’s centre for shoe manufacturing and export?

– Ayushi Ghosh (Writer, Econ Declassified)

References

Future Footwear. (2020, October 31). How India Footwear Industry is Beating China Potentially. Retrieved from https://www.futurefootwear.in/how-india-footwear-industry-is-beating-china-potentially/ 

German footwear maker to shift production to India from China (2020, May 19). Business Insider India. Retrieved from https://www.businessinsider.in/business/news/german-footwear-maker-to-shift-production-to-india-from-china/articleshow/75824816.cms

Gogna, N. (2020, July 3). On a shoestring: COVID-19 & Indian footwear industry. Trade of Promotion Council India. Retrieved from https://Www.Tpci.in/Indiabusinesstrade/Blogs/on-a-Shoestring-Covid-19-Indian-Footwear-Industry/  

Kumar, P. S. (2019). Importance of Indian Footwear Industry. The Leather Post, 4(4), 4–9. CSIR-Central Leather Research Institute. Retrieved from https://www.clri.org/CLRIMagazine/LEATHERPostSeptember2019.pdf

Kumar, S. C. (2020, May 14). Footwear industry bets on anti-China sentiments, seeks non-leather export focus for post-Covid growth. The Financial Express. Retrieved from https://www.financialexpress.com/industry/footwear-industry-bets-on-anti-china-sentiments-seeks-non-leather-export-focus-for-post-covid-growth/1958228/ 

Ministry of Commerce and Industry. (n.d.). Annual Export revenue of Indian Footwear Industry from 2010-2020 [Graph]. Tradingeconomics.Com. Retrieved from https://tradingeconomics.com/india/exports-of-footwear

Nayyar, M., Chawla, A., & Kohli, S. (2020, September 9). Non-Leather Footwear Industry in India. Invest India. Retrieved from https://www.investindia.gov.in/siru/non-leather-footwear-industry-india

Singh, A. (2020, January 22). Too much tax, shortage of skilled talent are Indian footwear industry’s biggest challenges: Unistar founder HS Bahety. SME Futures. Retrieved from https://smefutures.com/too-much-tax-shortage-of-skilled-talent-are-indian-footwear-industry-biggest-challenges-unistar-bahety/

Photo Credit

Indian Women’s Footwear by LumenSoft Technologies. Unsplash. https://unsplash.com/photos/sKFiQmGh7v4

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