India’s leather industry continues to grapple with a prolonged export downturn despite successive government interventions, duty concessions and a more competitive rupee. Rising freight costs, weakening overseas demand, domestic infrastructure bottlenecks and increasing manufacturing expenses are putting further pressure on exporters, raising questions about the industry’s ability to achieve the government’s ambitious $15 billion export target.
India’s leather exports stood at $5.9 billion in FY2015-16 but declined to $4.75 billion in FY2025-26, marking a significant contraction over the decade. The downward trend has continued, with exports falling another 3% year-on-year during the five months ended September 2026.
The Union Budget 2026 announced several measures to support the sector, including duty relief, extended timelines for meeting export obligations and targeted financial support for credit and investment. However, these interventions have yet to translate into a sustained recovery in export performance.
Soaring Freight Costs Hit Export Competitiveness
The ongoing conflict in West Asia has further aggravated the situation, with sharply higher freight rates and unpredictable vessel connections disrupting export supply chains.
“Freight from Nhava Sheva to New York was $1,800 per FEU (Forty-Foot Equivalent Unit), which is now $12,000. Freight from Nhava Sheva to Jebel Ali was $200 per FEU, which is now $4,500. It has a crippling effect on shippers,” said Syed Hamid of Crest Container Lines Pvt. Ltd.
He also pointed to transhipment delays, noting that exporters cannot always predict which connecting vessel will carry their shipments, making delivery schedules increasingly uncertain.
Port Infrastructure and Inland Connectivity Remain Weak Links
Beyond international freight costs, India’s port infrastructure and domestic logistics connectivity continue to constrain export competitiveness.
Ashish Gupta, CFO of Rahman Industries Limited, which manufactures leather products and footwear for fashion, accessories, safety footwear and upholstery, highlighted the limitations in India’s ability to accommodate large mother vessels.
“At present, mother ships can’t dock in India, so vessels need to use other countries’ ports. Our Vizhinjam port has the required depth. We must build infrastructure so that it can be used fully,” Gupta said.
The challenges extend beyond ports. Manufacturing clusters in Tier-2 and Tier-3 cities often face inadequate rail connectivity and inefficient transportation links to major gateways. Delays in moving finished goods from factories to ports, followed by vessel waiting times, increase logistics costs and extend delivery schedules.
“If there is direct rail connectivity or better movement of goods from industrial areas to ports, it would reduce both costs and transit times,” Gupta added.
Rising Labour Costs and Raw Material Constraints
The footwear segment, which accounts for around 40% of India’s leather industry, is particularly exposed to rising production costs and supply-chain disruptions.
Uttar Pradesh, the country’s largest leather-exporting state, accounting for approximately 46% of leather exports, is reportedly reviewing concerns raised by manufacturers relating to raw-material availability, skilled manpower, logistics, financing and marketing.
In Mumbai’s Dharavi, a major leather manufacturing cluster dominated by small-scale units, the shortage of skilled artisans has pushed labour costs sharply higher.
“The cost of hiring highly skilled artisans in Dharavi has increased by 30–40% due to their dwindling availability. In some cases, the increase can exceed 50%, depending on the skill required. This is the case for most leather manufacturers in Dharavi,” said Sachin Shinde, Founder and Creative Director of Maruti Leather Crafts.
Global Demand Weakens Amid Competition from Alternatives
The industry’s difficulties are compounded by declining demand in key European markets and growing competition from cheaper alternatives, particularly artificial leather. This has intensified pricing pressure and made it increasingly difficult for Indian manufacturers to maintain margins while competing in international markets.
India is currently the world’s fifth-largest exporter of leather goods, with considerable untapped potential for expansion. The sector is also an important employment generator, providing livelihoods to around 4.4 million people, of whom two in every five are women.
An October 2026 report by Ambit Asset Management described India’s leather industry as significantly underdeveloped relative to its potential. Highlighting the gap in global competitiveness, the report noted that India’s share of footwear imports among its Free Trade Agreement (FTA) partner countries stood at just 1.7%, compared with China’s 28.4%.
Structural Reforms Needed to Revive Exports
The persistent decline in exports suggests that government incentives and currency competitiveness alone may not be sufficient to revive the sector. Exporters need a broader improvement in the competitiveness of the entire supply chain, covering affordable freight, reliable vessel connectivity, efficient ports, better inland transportation, access to raw materials and availability of skilled labour.
With India targeting $15 billion in leather exports, the gap between ambition and current performance remains substantial. Reversing a decade-long decline will require more than financial incentives; it will demand coordinated action to address the structural weaknesses affecting manufacturing, logistics and global market access.