What's Happening?
The Indian government is preparing a $1 billion package aimed at enhancing the country's footwear manufacturing sector. This initiative comes in response to the 50% tariff imposed by the United States on Indian footwear exports, which has significantly
impacted the industry. The Department for Promotion of Industry and Internal Trade had previously suggested a production-linked incentive for the sector, but it was not implemented due to changes in government policy. The new package is designed to support the entire value chain, from raw materials to finished products, and is expected to provide benefits to investors in this labor-intensive industry. Discussions regarding the package are in advanced stages, and an official announcement is anticipated soon. India, the second-largest footwear producer globally, has seen its position in the leather footwear market decline as sports shoes and athleisure have gained prominence, with China and Vietnam leading the market.
Why It's Important?
This development is crucial as it addresses the challenges faced by the Indian footwear industry due to U.S. tariffs, which have disrupted investment plans and increased reliance on imports for raw materials. By boosting domestic production capabilities, the package aims to integrate Indian companies into the global value chain, enhancing their competitiveness. The initiative also aligns with India's broader strategy to increase domestic consumption and exports, potentially benefiting from upcoming free trade agreements with the European Union and the UK. These agreements could offer duty concessions, further supporting the sector's growth. The package is expected to stimulate economic activity, create jobs, and reduce dependency on imports, particularly from China.
What's Next?
The Indian government is expected to finalize and announce the package soon, which will likely include measures to improve the production capacity of inputs and reduce import duties on raw materials. This could lead to increased investment in the sector and expansion of manufacturing facilities. Additionally, the government is pursuing free trade agreements with the European Union and the UK, which could provide further opportunities for Indian footwear exports. The domestic market is also projected to grow, with average footwear consumption expected to rise, aligning with international norms.
