The effect of Chinese products on leather, chemical and fashion industry
There is a drastic change in various industries of the Indian economy. The leather and chemical industry is currently experiencing turmoil. The leather manufacturers and traders have pleaded to the Government of India for the imposition of anti-dumping duty. This anti-dumping duty is to be levied on Chinese footwear in order to protect the domestic industries which need to compete against cheap imports.
Import duty which is the tax collected on imports and a few exports by the customs authorities is also been requested to be hiked. The value of a commodity determines the import duty. It depends on the situation and the product. There are several references to import duty such as customs duty, tariff, import tax, or import tariff.
The hike in import duty is reportedly wished upon chemicals like the sodium sulphide and basic chrome sulphate, which again are imported from China and are used for the purposed of treating leather.
Majorly the leather industry and minorly the chemical industry are urging for increase in the duties from 8.2% to 35%. This import duty is considerably higher by almost 4 times and it helps in the Make in India initiative and curbs the use of Chinese products.
According to the Economic Times, the annual manufacturing capacity of China’s footwear industry is 13.1 billion pairs. It consumes 4.1 billion pairs of footwear. The volume of exports is large. India is capable of producing only 2.57 billion pairs of footwear and in 2019, it’s per capita consumption increased to 2 pairs per year. This was an increase from 1.7 pairs three years ago.
This same can be spoken of the chemical industry, the manufacturers and distributors of chemicals such as sodium sulphide also face the wrath of Chinese chemicals. The distributors may choose the Indian manufacturers rather than the foreign manufacturers of these chemicals. But the distributor’s may do so only when the Indian chemicals are more lucrative for them. Therefore, a hike in import duty and anti-dumping duty would raise the prices of the chemicals in the Indian market.
The distributors can then choose the effective manufacturer on the basis of the Distributor’s Discretion on Manufacturer’s matrix (DDMM) which is formulated by Harsha Sheelam, and published in the research paper “Cleaning Chemicals usage for House Keeping with Special reference to Hospitality Industry: A Study” with JOHAR journal, BITS, Mesra.
The above matrix helps distributors decide on which product to distribute which are manufactured by various manufacturers.
According to a report on Economic Times, the regional chairman at Council of Leather Exports, Mr.Ramesh Juneja, said that multiple factories which were inclined to produce chemicals for the treatment of footwear have been defeated fatally due to the cheap Chinese imports of these chemicals. He also said that there was an increase in import duty on footwear to 35% in 2019, thereby reducing the entry of Chinese products. But the impose was not highly efficient, therefore, the anti-dumping duty can highly control this.
The leather industry and its suppliers have taken upon themselves to boycott Chinese commodities. The ongoing tension between India and China at the Line of Actual Control is enraging more industries to do so. The tension has also pushed the leather industry to call on taxes and duties on the imports.
According to India Brand Equity Foundation, IBEF, in 20220, India would be the fifth-largest manufacturing sector in the world. The Government of India concentrates on increasing jobs up to 100 million and GDP by 25% through this sector.
India has lured many investments in the manufacturing sector. Oricon enterprises formed a joint venture agreement with Tecnocap, an Italy based company and formed a new company called ‘Tecnocap Oriental’ for the manufacture of lug caps. In 2019, Berger Paints India Limited which is based in Kolkata had acquired a stake of over 95% of STP Ltd, this is mainly in protective coatings and waterproofing. In the same year, Bharat Earth Movers (BML) manufactured the first coach in Mumbai under Make in India. It prospects that the companies would spend more on hiring and also have good growth prospects as India’s manufacturing stands at 54.40 PMI in February 2020.
The low manufacturing capacity in India, competition with cheap imports, failure to adapt to technology such as e-commerce, are the reasons which hamper the footwear industry.
The national secretary of Confederation of All India Traders (CAIT), Mr.Praveen Khandelwal had stated that China has a bad influence on the footwear industry in multiple ways. Firstly, the prices of leather for footwear making is sold at a lower price in India by China. Secondly, footwear is exported by China directly to India.
There are two types of industries: labour intensive and capital intensive, more or less on either side. A labour-intensive industry used more of labour and less of capital, such as machinery and equipment. On the other hand, capital intensive industry uses more capital and less of labour. The leather industry in India is highly labour intensive which implies that it creates a source of employment for semi-skilled and unskilled labourers. Due to lack of business, the manufacturers tend to lower the cost of production by pulling out labourers. This leads to loss of employment at the ground level. According to the national secretary of CAIT, China also exports leather wallets, leather stationery, and visiting card holder at cheap prices.
Leather products such as footwear and accessories are a part of the fashion industry. The Indian fashion industry also suffers due to the low priced China products. For example, the following Indian companies are into leather bag making:
- Hidesign – which was established in 1978. It uses vegetable-tanned hides and is eco-friendly.
- Viari which is an Indian brand has scaled heights to international level. They are also an eco-friendly company.
- Baroque mixes fabric and leather in their premium quality bags.
- Grain India uses skilled artisans for their bag-making company.
COVID has made a drastic change in the fashion industry. Many companies had to cancel their orders. Although now they have started home delivery and using sales strategy. It is still unlikely for the fashion businesses to survive in this pandemic. There is definitely a massive drop in the consumer demand for fashion in case of the stores. The demand is coming through online selling. Here, the brick-and-mortar companies that solely depend on physical stores for their trade suffer. Again, a considerable loss of output, employment, and growth.
During the lockdown in India, it has created a temptation for the consumers to adopt online shopping whether its food items or clothing. People are accustomed to e-commerce and this has encouraged many fashion brands to adopt eCommerce.
Not only the small traders of the leather industry, but also many top brands such as Louis Philippe, Allen Solly, Puma, and Wildcraft, are supplying masks gloves and sanitizers. It was not their primary product before the pandemic, but brands have currently shifted their primary products to make ends meet. This shift may also be due to the need for meeting social standards and CSR. Not only the offline stores but also the online brands suffer. E-commerce labels like Myntra and Flipkart have used marketing strategies as they have a lot of inventory stored. This situation has led to businesses following high discounted rates for the products to attract consumers. The suppliers on these shopping websites are small to large scale manufacturers, distributors of products. Hence, the industry stands affected due to multiple reasons.
A successful designer, Sabyasachi Mukherjee had shut down all of his stores even before the lockdown and made sure that everyone in the company had a bank account. He knew that there would be a lockdown and he didn’t want his people to struggle living in those remote villages. This was very thoughtful as they protected their workers from the economic crisis and so should other fashion brands.
It would be difficult for the workers to come back and start with their artisanal Indian designs. During this pandemic, we have a lot of time to introspect about the changes in the consumption patterns.
There is a need to revive the leather, chemical, and fashion industry as a whole. There is a demand in the home country but a lack of production capacity to meet the demand. The low production capacities may be intentional in order to prevent overproduction which leads to increased costs.