China footwear biz shrinks, India gets a foot in the door

It is good news for Indian footwear industry. As China, the footwear giant next door is slowly losing out its business, India stands to gain part of it.

China is the most dominant country in footwear exports having a share of more than 70 per cent in volume terms. It sells almost three out of every four pairs of footwear exported worldwide. However, its share in world exports in value terms is about 40 per cent as China’s exports are dominated by non-leather footwear. The next most dominant exporter, Italy has a value share of nine per cent. India’s share in the global export market of $120 billion is a paltry 1.9 per cent in value.

Due to increasing labour cost in China, the main importing countries are shifting sourcing to other low cost countries. Countries like Vietnam, Philippines and India have started seeing a shift of business.

“Even a two per cent loss for China can be a big growth of 50 to 60 per cent for India. Retailers like Walmart and Tesco are looking at sourcing from other countries. Many of the Indian players are now seeing increasing demand from countries like the US,’ said Rohit Inamdar, senior VP and co-head, corporate sector ratings, ICRA.

“We cannot replace China as we do not have the capability of large-scale production. However, many importers are now looking at India for smaller lots. The image about India as a “bad quality, bad-delivery” producer has changed. Large players are investing in infrastructure, technology and training. In three to five years, we can grab a share of the Chinese orders,” said Harkirat Singh, managing director of Woodland. Exports account for 20 per cent of Woodland’s sales.

Moreover, Indian government has taken various measures and initiatives in order to support its growth, added Inamdar. There have been initiatives to raise foreign capital, establishing of various supporting institutions and de-reservation of industry from small scale industry. It has proposed setting up of industrial parks for footwear. Under the Foreign Trade Policy, government also has announced several duty concessions for the footwear industry.

Despite a bright long-term outlook, footwear export in FY16 is expected to witness single digit growth, according to ICRA. The footwear exports from India, which witnessed a healthy YoY growth of 36.2 per cent and 36.0 per cent in the FY14 and first half of FY15 respectively, ended FY15 with a much lower growth of 17.6 per cent in rupee terms.

Lower demand from Europe and depreciation of Euro against Rupee pulled Indian exports down. India is heavily dependent on Europe, which accounts for 75 per cent of exports.

“Exports to Europe have been slower for a couple of years. In the second half of last fiscal exports were largely hit by the currency movement. However, many exporters are diversifying their markets to cut dependence on Europe,” said Singh.

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