Leather Exporters Achilles Heel : Currency Fluctuation

How you respond to the challenge in the second half will determine what you become after the game winner or a loser ~ Louis Camuti

As reported earlier weakening Euro is now emerging as a chief cause of concern for the Indian leather exporters. It can cause a downward fall of the leather industry and holds the potential to reduce its growth by 10% out of the projected figures. Repeated advisories were issued (to avoid long term contracts) and feelers were sent to the government to look into this, but unfortunately there wasnt any timely action taken.

One of the main reason for such a huge negative impact of Euro weakening is that almost 70% of Indian leather products are exported to Europe. No wonder, there are apprehensions that if corrective actions are not taken soon, this crisis will have long term impact on the currently thriving leather industry of India.

Media reports suggest that Indias leather industry, which was already hit by the global economic slowdown, had experienced a downfall spree for about 18 months before showing a positive growth of 17.94 % in the current fiscal year.

The clouds of recession seems to have drifted from US to Europe and many major banks are wobbling in self created financial mess. Euro has lost its stability and a worst case scenario could be a repeat of wall street like meltdown.

As Indian economy is on the recovery mode, the government of India is thinking about withdrawing some of the stimulus packages provided during slowdown which could further complicate the problem for these exporters.

On the brighter side, some of the research reports indicate that despite the current challenges faced by leather industry it can still eye a 15% rise in export, somewhere around $3.8 billion in FY11. These reports further suggests that despite the gloomy prediction about the European market, leather industry should be able to maintain its double-digit growth in the upcoming months.

Though many exporters dont agree with the findings, analysts say that such a situation has given an opportunity to Indian exporters to venture outside safe harbours with a long term view.

They further substantiate their claim that high growth of the leather industry is possible due to the recovery in major export destinations (except Europe), price advantages provided by Indian exporters and buyers de-risk strategy of reducing dependence on China.

Even though currency fluctuation remains our exporter's achilles heels, we hope that the Indian leather exporters will be able to counter this challenge and emerge stronger from this.

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by: Amit S

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