A Project Report

On

A Study Of Leather Export from India to Europe

Guided By:

Dr. JITENDRA KUMAR SINGHSubmitted by: Aishwarya SharmaREGD.NO: 1305003370CENTER CODE: 00963

Master of Business Administration

In

International Business Management

November 2014 Winter SessionBONAFIDE CERTIFICATE

Certificated that this project report titled A Study Of Leather Export From India To Europe is the Bonafide work of Aishwarya Sharma, bearing Roll NO: 1305003370 who carried out the project work under my Supervision. Guide

Head of DepartmentDr. JITENDRA KUMAR SINGH

JAYESH BHATNAGAR

DECLARATION

I, Aishwarya Sharma hereby declare that this Project Report titledA Study Of Leather Export From India To Europe, is a genuine project undertaken by me under the guidance of Dr. Jitendra Kumar Singh, SMU, Rajouri Garden in partial fulfillment of the requirements of the award of the MBA.

All findings and analysis in this project report are true, authentic and impartial. I promise that the data gathered for the purpose of this report will not be made public and will be kept confidential, except for academic purpose.

ACKNOWLEDGEMENT

The satisfaction which accompanies the successful completion of the project , is incomplete without the mention of a few names. I take this opportunity to acknowledge the efforts of the many individuals who helped me make this project possible. First and foremost, I would like to express my heartiest appreciation and gratitude to my Guide Dr. Jitendra Kumar Singh. His vision and execution aimed at creating a structure, definition, and realism around the project and fostered the ideal environment for me to learn and grow. This project is a result of their teaching, encouragement and inputs in the numerous meetings he had with me, despite their busy schedule. He has helped provide the scope and direct my studies in a matter to make them most beneficial to me and to the company. I am extremely grateful to my Faculty Guide for this project Mr. B.N Sharma for her valuable inputs from time to time. I would also like to thank all the faculty members of SMU, Rajouri Garden for helping me a lot.

ABSTRACT

The topic chosen for the current Thesis study is A studyof leatherexportsfrom India to Germany. The following study is based on a strong assumption that India is one of the major exporters of leather and leather goods to North-American countries. This Hypothesis is based on an excerpt from the study conducted in Germany Embassy to Indias on the bilateral trade patterns.

Nature of Study

The Thesis study in subject now is an exploratory study with a touch of descriptive research. Fundamentally it is a Primary Data Study.

Mode of data collection

Questionnaires & Internet is the only source for obtaining the data for this Thesis. However for converting the data into the Germanyble format and context MS Word and MS Excel have been extensively used.

Analytical tools used Simple Percentages and growth rates have been used as a part of Mathematical tools.

Using statistical tools like GAP, the complex data has been tabulated and drawn into charts and analyzed subsequently.

As a part of business tools, SWOT analysis has been adopted. Theoretical OrientationThe study must include all the basic knowledge about the industry and Economies involved in the study. For this purpose, an extensive understanding of the different aspects of links involved in the whole value chain of the study had to be carried out. Once the reader felt the gasp of the topic and nitty-grittys involved, I have introduced him to various combination of the quantitative data relevant to the topic.

Outcomes

The above dealt tools are sure to establish clear-cut relationship between the missing information obtained from the secondary research. The outcome necessary for establishing the conclusion and to prove the hypothesis would be from the quantitative information.

Limitations of the Research

For the sake of better understanding and analysis, Germany has been defined as GERMANY and Canadian markets only.

The data quoted in this report is considered to be latest, since the available sources are not uniform and not as often updated.

No future projections for the Industry have been made, since such projections are subjected to a lot of intricate factors of the Industry. And it is not possible to deal with so many factors in a small study like this.

ACKNOWLEDGEMENTSI would like to convey my gratitude to Mrs. Shweta Wadhwa for her kind support and insightful guidance at every step of this Thesis Writing, without whom this work would not have seen the light of the day. He has been of great inspiration and support for me at every turn of the process.

Further I would like to thank and credit all my professors at JIMS with the success of this work, which is an offshoot of the seeds of knowledge sown by them. Most Importantly, I would like to thank Mr. Anoop Sethi for their invaluable suggestions in this work and for having guided me to the right path at the right time.

TABLE OF CONTENTS

INTRODUCTION TO THE TOPIC

1. About the Leather Industry ....... 2

1.1.1 Introduction to Leather Crafts in India .3

2. India Snapshot of the Economy and Infrastructure....4

2.1 Economic Overview...4

2.2 Infrastructure.....5

2.3 Indian Ports....6

3. Organizational Setup for Promoting Exports in India...8

3.1 ITPO....8

3.2 Fairs in India......9

3.3 Fairs Aboard...........9

4. Trade Initiatives with Germany....11

4.1 Trade with North NAFTA...11

4.2 Measures Undertaken for Export Promotion to NAFTA........15

5. Current Status of Leather Exports from India.....16

5.1 About Council for Leather Exports (CLE)...17

5.2 Global Leather Industry.18

5.3 Forms of the Leather Exported.....19

5.4 Export Duty Chargeable on the Indian Leather Goods...22

5.5 Global Exports vis--vis India's Export.....23

6. GERMANY Country Profile.....25

6.1 Economic Overview.........25

6.2 Trade Policy Developments.27

6.3 INDO-Germany Leather Trade.30

6.4 Government of Indias Initiatives.......31

7. Canada Country Profile...32

7.1 About the Country.......32

7.2 Economic Overview.32

7.3 Trade Policy......33

METHODOLOGY .............................................................................................35

ANALYSIS

8. Supply Side Analysis37

8.1 Quick Facts About the Indian Leather Market....37

8.2 Market Size...39

8.3 Performance of Leather Exports in the Past.....40

8.4 Trade with Germany......43

8.5 Competitive Scenario...44

8.6 Exports Promotion Measure for Leather Industry in India....46

9. Demand Side Analysis.....47

9.1 Germanys Total Leather Imports...47

9.2 Germany Trade Policy on Footwear and Leather Products...50

GAP ANALYSIS

10. Demand Supply Gap.51

10.1 Calculation of the Net Imports of the Germany..51

10.2 Calculation of Net Exports from India to Germany...51

10.3 Demand -Supply Gap for Leather Trade with the GERMANY..51

10.4 Demand -Supply Gap for Leather Trade with Canada...52

10.5 Demand -Supply Gap for Indian Leather Trade with North..52

SWOT ANALYSIS

11. Strengths and Weaknesses for Indian Leather Industry.54

11.1 Strengths..54

11.2 Weaknesses..56

12. Opportunities and Threats in the Global Leather Industry..57

12.1Opportunities...57

12.2 Threats..59

12.3 Major Competitors .61

RECOMMENDATIONS 62

CONCLUSION ...63

BIBLIOGRAPHY ...65

LIST OF TABLES

i. Types of Leather and Their Application 3

ii. Economic Indicators of India...5

iii. Snapshot of Indian Infrastructure ..5

iv. Indias Export and Import to/from the Germany...11

v. Indias Export and Import to/from Canada..13

vi. Export Duty Charged on Indian Leather goods...22

vii. Economic Indicators of United States....27

viii. Economic Indicators of Canada in 200633

ix. Sources of Production of Leather...37

x. Category-wise leather producing Firms39

xi. Leather Production by Category....39

xii. Value of Indian Leather Products Exported During 2005 06...40

xiii. Destinations Including Canada for Indian Leather exports....41

xiv. Leather Imports by India....42

xv. Exports of Broad Categories of Leather ...43

xvi. Top 10 Exporters of Leather as a Share of the Worlds Exports....44

xvii. Top 10 Exporters of Leather as a Share of the Worlds Imports....44

xviii. Indias Share in the World-wide Leather Imports...45

xix. Value of the Leather Apparel Imported by the Germany in the Recent Past...47xx. Imports of Leather by the Germany in the Recent Past.48xxi. Value of the Leather Apparel Imports by Canada in the Recent Past...48

xxii. Value of the Leather Imports by the Germany in the Recent Past49xxiii. Value of the Leather Imports by Canada in the Recent Past..49xxiv. Net Imports of Leather Products in Germany....51

xxv. Net Imports of Leather Products in Germany51

LIST OF FIGURES

I.

Important Hubs for Leather Production in India38

II. Breakup of Total Indian Leather Exports in 2005 06..40

III.

Value of Leather and Leather Products Exported During 1999 2005.41

IV.

Demand-Supply Gap with GERMANY..52

V.

Demand-Supply Gap with Canada....53

VI.

Demand-Supply Gap with Germany....54

PREFACE

This Thesis report is motivated to study one of the emerging topics of the Indian Foreign Trade. The topic chosen for the current Thesis study is A studyof leatherexportsfrom India to Germany.

The nascent motive in studying this particular topic is to investigate the rapidly changing conditions in the Foreign Trade Environment and the promises that it has in store for the Emerging Economies like India.

The present study is based on a strong assumption that India is one of the major exporters of leather and leather goods to North-American countries. This Hypothesis is based on an excerpt from the study conducted in Germany Embassy to Indias on the bilateral trade patterns. The referred article observes that Indias major exports to Germany include gems and jewellery, textiles, coir, jute and handicrafts, chemicals and allied products, engineering goods, leather and leather manufactures, etc.

The Hypothesis could be proved with the help of a thorough probe into the leather trade trends in the past both at the Exporters and Importers end. We will try to identify the Gap in the foreign trade trends between India and Germany. We will plug the Gap with the help of some judicious analytical tools. The resulting trend would give us a clear picture about the actual scenario of the Leather Trade trends between India and Germany.

Here for this study purpose I have considered the GERMANY and Canada as the whole Germanyn market.

INTRODUCTION TO TOPIC

1. About the Leather IndustryLeather

Leather is the suitable forms of Animal skins and hides. These skins and hides are treated to preserve them. Tanning converts the otherwise perishable skin to a stable and non-decaying material. Though the skins of animals such as ostrich, lizard, eel, and kangaroo have been used, the more common leathers come from cattle, including calf and ox; sheep and lamb; goat and kid; horse, mule, and zebra; buffalo; pig and hog; and seal, walrus, whale, and alligator. Leather making is an ancient art that has been practiced for more than 7,000 years

Tanning By the term Tanning, one might get confused with a term used for tanning of fair skin into dusky. The tanning of fair skin in humans by sunlight is completely different: ultraviolet light causes production and redistribution of the pigment melanin in epidermal cells.

In case of Leather industry it is the process through which raw animal hides or skins are chemically treated to convert them into leather. Vegetable tanning (using bark, wood, roots, or berries) has been practiced since prehistoric times. After removal of hair, flesh, or fat, a tanning agent displaces water from the interstices between the protein (mostly collagen) fibers in the skin and cements the fibers together. The agents most widely used are vegetable tannin, salts such as chromium sulfate, and fish or animal oil.

Types of Leather

i. Types of Leather and Their Application

Types of Leather

Application/Nature

Full-Grain leather

Furniture and Foot-wear

Corrected-Grain leather

Leather garments of inferior quality

Suede

Processed hide known as Latigo

Patent leather

Plastic coated leather

Shagreen

Un-tanned leather from horses back

Buckskin

Imperishable leather

Belting leather

Used in Luxury products like briefcases, portfolios, and wallets

Napa leather

Used in higher quality wallets, toiletry kits, and other personal leather goods

Source: www.answeRScom

1.1 Introduction to Leather Crafts in India

Rajasthan

The Rajasthan state has a long history in leather craft and industry and leather shoes known as jootis or mojdis (shoes decorated with beautiful embroidery) are made in Jaipur and Jodhpur. Embroidery known as kashida is done on the jootis. This embroidery is mainly done by the women, who also do a bit of fancy stitching or appliqu work to give a designer look to the shoes that have neither a left nor a right foot. Leather is also used for bookbinding and Alwar is well reputed for this craft that flourished in the 19th century under Maharaja Banni Singh. Bikaner is again famous for its kupis or camel-hide water bottles.

Delhi The current Indian capital Delhi was also an important centre of leatherwork during the Mughal period, Traditional leather jootis and slippers, which were sometimes ornamented with pearls, gold and silver were the piece de resistance. Embroidered bags, shoes were other popular items.

2. India Snapshot of the Economy and Infrastructure

2.1 Economic Overview

The economy of India is the fourth largest in the world as measured by purchasing power parity (PPP), with a GDP of Germany D3.63 trillion. When measured in USD exchange-rate terms, it is the twelfth largest in the world, with a GDP of USD785.47 billion or Rs 35, 34,615 0 million in 2005. India is the second fastest growing major economy in the world, with a GDP growth rate of 9.1percent, as of the first quarter of 2006. India's per capita income (PPP) of USD 3,400 is ranked 122nd in the world.

For most of its independent history, India adhered to a quasi-socialist approach, with strict government control over private sector participation, foreign trade, and foreign direct investment. Starting from 1991, India has gradually opened up its markets through economic reforms by reducing government controls on foreign trade and investment. Privatisation of public-owned industries and some sectors to private and foreign players has continued amid political debate.

India has a labour force of 496.4 million of which 60percent is employed in agriculture or agriculture-related industries, 17percent in mainstream industry and 23percent in service industries. India's agricultural produce includes rice, wheat, oilseed, cotton, jute, tea, sugarcane, potatoes. Major industries include textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum and machinery.

ii. Economic Indicators of India

Indicator

FY 2005 -06

Value in million USD

Percent growth

Service sector growth-

9.8Domestic and International air traffic growth

-

36.3 *Domestic and International air cargo traffic growth

-

17.5*Growth in merchandise exports

-

29.2 *GDP at factor cost at current prices

72,316.3

12.5

Agriculture and allied sectors

114,937.8

2.3

Food grains production (tones)

209.3

2.3

Index of industrial production

215.4

7.8

Electricity generated (kwh)

458,600

4.7

Wholesale price index

(on February 4, 2006)

196.2

4.1

Money supply (Outstanding at the end of financial year)

576700.5

16.4

Imports at current prices (April-Jan 2005-06)

108,803

26.7

Exports at current prices

(April-Jan 2005-06)

74,978

18.9

Foreign currency assets

(by end January 2006)

133,770

8.2

Exchange rate (Re/USD)

(Average April-January 2005-06)

44.25

2.1

(* Estimated figure)

Source: http://www.ibef.org

2.2 Infrastructure

iii. Snapshot of Indian Infrastructure in the Recent Past

Period

National Highways total length (in km)

Widening to Two Lanes

Widening to Four Lanes

Major bridges

2002- 0358,112

710

418

14

2003- 04

65,569

671

799

17

2004- 05

65,569

221

841

1

Indian Roads

Railway Network (1998-99)

Air traffic at Major Airports

Gauge

Route (km)

Running Track (km)

Total Track (km)

Broad

44,220

62,180

1,06,400

Meter

15,180

15,880

31,060

Narrow

3,410

3,450

6,860

Name of the City

Services

Percentage of total traffic

Mumbai

International and Domestic

30.3

Delhi

International and Domestic

21.8

Chennai

International and Domestic

9.2

Calcutta

International and Domestic7.1

Bangalore

International and Domestic5.1

Hyderabad

Limited International and Domestic

3.55

Thiruvananthapuram

International and Domestic

3

Ahmedabad

Limited International and Domestic

2.1

Goa

Limited International and Domestic

2

Calicut

Limited International and Domestic

1.4

Source: http://civilaviation.nic.in/ ; http://www.indiacore.com

2.3 Indian Ports

Indian Ports are the gateways to India's international trade by sea and are handling over 90percent of foreign trade.

The 6,000 km long Indian coastline has 12 major ports and 181 minor/ intermediate ports out of which 139 are operable. The major ports are located at Calcutta/ Haldia, Chennai, Cochin, Ennore, Jawaharlal Nehru Port at Nhava Sheva, Kandla, Mormugao, Mumbai, New Mangalore, Paradip, Tuticorin and Vishakhapatnam.

The 12 major Indian ports handle 90 percent of the all-India port throughput. The 139 minor ports are under the jurisdiction of the respective State Governments. During 2001- 2002, the total cargo handled at major ports was 287.56 million tones as against 281.10 million tones during 2000- 2001.

Though the bulk of Indian trade is carried by sea routes, the existing port infrastructure is insufficient to handle trade flows effectively. The current capacity at major ports is overstretched. The major ports together have a capacity of 215 million metric tones (MMT) at 1997- 98 levels. The major ports handled 287.56 million tones in 2001- 2002. The situation of limited capacity and high demand has inevitably resulted in port congestion.

Problem Areas

The performance of Indian ports does not compare favorably with that of efficient international ports. On three important parameters- capacity, productivity and efficiency, Indian ports lack in comparison to some of the major international ports. In international terms, labor and equipment productivity levels are still very low due to the outdated equipment, poor training, low equipment handling levels by labor, uneconomic labor practices, idle time at berth, time loss at shift change and high mining scales and low datums.

3. Organizational Setup for Promoting Exports in India

3.1 INDIA TRADE PROMOTION ORGANISATION (ITPO)

The Trade Fair Authority of India (TFAI) was incorporated under Section 25 of the Companies Act, 1956, on 30th December 1976, and commenced business with effect from 1st March 1977. Subsequently, the Trade Development Authority, a society, registered under the administrative control of Ministry of Commerce & Industry, was merged with the TFAI with effect from 1st January 1992 and the newly formed Company was renamed as India Trade Promotion Organization.

To strive to be the pre-eminent trade promotion organization of India and as such to promote, facilitate, encourage and coordinate various activities and programmes which would enhance Indias share in international trade and contribute in maximizing the countrys foreign exchange earnings through the instrument of trade in goods and services.

Objectives

To promote, organize and participate in industrial trade and other fairs and exhibitions show-rooms and depots in India and abroad and to take all measures incidental thereto for boosting up countrys trade.

To publicize in India and abroad International Trade Fair and Exhibitions to be held in India and invite the foreign participants to participate in them.

To organize and undertake trade in commodities connected with relating to such fairs, exhibitions show-rooms and depots in India and abroad and to undertake the purchase, sale, storing and transport of such commodities in India or any where else in the world.

To undertake promotion of exports and to explore new markets for traditional items of export and development exports of new items of export and development exports of new items with a view to maintaining, diversifying and expanding the export trade.

3.2 Fairs in India

ITPOs domestic exhibitions mirror the latest developments in various sectors of the Indian industry. These events provide opportunity to the Indian manufacturers/ exporters to promote their export and also launching and test marketing of their new products and services. During 2005-06, ITPOs calendar of exhibitions consist of 23 exhibitions including IITF 2005, India International Leather Fair, International Lather Goods Fair, Tex-Styles India, Delhi Book air, Arogya, Aahar, Sajavat Fair, Stationery Fair, Gardening fair (new event), Sports Goods & Physical Fitness Equipment Exhibition, I.T. India and Education and Job Fair. In addition, 70 other exhibitions are being organized by Industry Associations, EPCs and private fair organizers. These include Indian Handicrafts & Gifts Fair, Auto Expo 2006, Plast India, DEF Expo and World Book Fair.

During the year 2006-07, ITPO targets to organize about 26 fairs in India. This will include some well established fairs like IITF, Aahar, Delhi Book Fair, IILF Chennai besides event on new product like Gardening and Cool Home etc. In addition, the other organizers are likely to hold 60 third party events including major fairs like Indian Handicrafts and Gifts Fair, Garment Fair, Super Seven Show, Indian Enginerring. Trade Fair, 2006.

3.3 Fairs Abroad

During April-December 2005, ITPO organized participation in 46 trade fairs out of total 58 events expected to be held during the year 2005-06. Out of these 46 event, 18 were general events and 28 were specialized events further of all the 46 events, 12 were in WANA, 16 were in Europe, 8 in South East Asia and 10 in America. It includes Expo 2005 Aichi, Japan concluded in the month of September, 2005.

Trade Development Activities

ITPO organizes several export development programme by using different promotional tools for selected products in identified markets. This created awareness of Indias manufacturing and export capabilities especially in new markets, as also provided opportunities to Indian exporters to garner export orders During the year up to

December 2005, four Buyer Seller Meets were organized- the 16th India Home Furnishing Fair and the 26th India Garment Fair in Japan and one Buyer Seller Meet in Auckland, New Zealand and another one in Sydney, Australia. These four events together generated business worth USD 26.24 million and were attended by 2733 buyers from leading department stores, wholesalers, importers, trading houses etc.

Two BSMs/ Indian exhibitions are targeted to be organized in Japan during 2006-07.

During the year up to November, 2005, visit of 10 Buying Delegations from Japan, Russia, GERMANY and Germany was hosted and one to one meetings were organized with the potential India units during their visits. During 2006-07, we expect to host about 12 Buying Delegations from various countries across the globe.

In order to get maximum foreign business delegation at the time of IITF 2005, a Seminar on International Trade Opportunities in Technology was organized. An export potential Seminar is proposed to be organized during Tex-Styles India 2006.

Under the new Business Development Programme with Department Stores, two Department Stores have been identified for organizing India Promotion during next year.

4. Trade Initiatives with Germany

4.1 Trade with Germanyn Free Trade Agreement (NAFTA)

Region

The Germany Free Trade Agreement (NAFTA) was signed in 1994. It is a free trade area among the United States of America, Canada and Mexico. It is the largest and most important trading block of the world. Indias bilateral trade with member countries of the NAFTA are as follows:

India-U.S. Bilateral Trade

The Germany is Indias largest trading partner and foremost export destination. At present it accounts for 16.48 percent of Indias exports and around 6.26 percent of Indias imports. India accounts for only about 1.06 percent of the GERMANYs total exports and imports.

iv. Indias Export and Import to/from the Germany

Year

Exports

Percentage

Growth

Imports

Percentage Growth

Balance of

Trade

2000-2001

9305.12

10.83

3015.00

(-) 15.31

6290.12

2001-2002

8513.34

(-) 8.50

3149.62

4.46

5363.73

2002-2003

10895.76

27.98

4443.58

41.08

6452.18

2003-2004

11490.11

5.45

5034.86

13.31

6455.25

2004-2005

13271.47

15.50

6833.19

35.72

6438.28

(In million USD)

Source: DGCI&S

Trend in India-U.S. Bilateral Trade

Growth of India's exports to the Germany in the year 2004-05 over the previous year was 15.50percent while the growth in the Germany exports to India was 35.72percent over the previous year. There is a huge untapped potential to increase bilateral trade. Major items of Indian exports to the Germany are: Gems & Jewellery (USD 4040.95 million); RMG Cotton incl. Accessories (USD 1403.38 million); Manufactures of Metals (USD 738.02 million); Primary & Semi-Finished Iron & Steel (USD 576.99 million); Drugs, Pharmaceuticals & Fine Chemicals (USD 576.42 million). Major import items from the Germany to India are: Electronic Goods (USD 1248.68 million); Machinery except Elec. & Electronic (USD 812.94 million); Other Commodities (USD 717.05 million); Organic Chemicals (USD 363.50 million); Transport Equipments (USD 348.42 million).

During the period April-August, 2005, Indias exports to the Germany at USD 6003.36 million registered a positive growth of 14.26percent over the Corresponding period of the previous year when the exports were USD 5254.17 million.

During the period April-August, 2005, Indias imports from the Germany at USD 2760.11 million registered a positive growth of 26.38percent over the corresponding period of the previous year when the imports were USD 2184.02 million.

FDI ApprovalsThe Germany ranks first and accounts for about 24.41percent (USD 16.40 billion) of the total FDI approvals of USD 67.84 billion accorded since 1991. The leading sectors attracting FDI from the Germany are Fuels (Power & Oil Refinery), Telecommunications, Electrical Equipments, Food Processing Industries and Services.

Prospects in Trade for the Region

Considering the size of the U.Ss import market, there is an immense scope for expanding our export base. In light of Chinas performance in the U.S. market, it is felt that it should be possible for India to raise its market share from 1percent to 2percent in the U.S. market in the next three years, with the right medium term strategy.

India-U.S. Commercial Dialogue During the visit of the U.S. President to India, a document India-Germany Relations: A Vision for the 21st Century was released by the Prime Minister of India and the President of United States of America on 21st March, 2000 at New Delhi. To implement the Indo-U.S. Commercial Dialogue envisaged in that document, the Minister of Commerce & Industry and Secretary, U.S. Department of Commerce had signed the India-United States Commercial Dialogue on 23.3.2000 at New Delhi. Interactions under this Dialogue have been taking place from time to time to sort out concerns of both sides on bilateral issues. These include Video conferences on Intellectual Property Rights, Agricultural Biotech & Food Safety Regulations and on Standards.

India - U.S. Trade Policy ForumThe establishment of the India-Germany Trade Policy Forum was announced during the visit of Prime Minister Dr. Manmohan Singh to the Germany in July, 2005. It is designed to expand bilateral trade and investment relations between India and the United States. The Trade Policy Forum is a part of the overall economic dialogue between India and the United States. The Forum had its first meeting in New Delhi on November 12, 2005 and discussions were held on Tariff and Non-Tariff Barriers; Agriculture; Investment; Services; Intellectual Property; and the Doha Round.

India-Canada Bilateral Trade At present Indias exports to Canada accounts for 1.02percent of Indias global exports and Indias imports from Canada accounts for 0.70percent of Indias total imports. Indias exports and imports to/from Canada have been as below:

v. Indias Export and Import to/from Canada

Year

Exports

Percentage

Growth

Imports

Percentage Growth

Balance of

Trade

2000-2001

656.47

-

397.07

-

259.40

2001-2002

584.42

(-) 10.97

529.43

33.28

55.38

2002-2003

698.27

19.40

566.29

6.96

131.98

2003-2004

763.20

9.30

725.89

28.18

37.31

2004-2005

818.25

7.21

760.33

4.74

57.92

(In million USD)

Source: DGCI&S

During the period April-March, 2004-05, Indias exports to Canada at USD 818.25 million registered a positive growth of 7.21percent over the corresponding period of the previous year when the exports were USD 763.20 million.

The major commodities of exports to Canada are Readymade Garments of Cotton including accessories (USD 193.07 million), Drugs, Pharmaceuticals & Fine Chemicals (USD 106.35 million), Manufactures of Metals (USD 58.67 million), Cotton Yarn, Fabrics, Made-ups (USD 52.58 million), Machinery and Instruments (USD 34.64 million) were the major products exported to Canada.The major commodities of imports from Canada are Newsprint (Germany D 117.21 million), Pulses (USD113.70 million), Fertilizers (USD 112.11 million), Pulp and Waste Paper (USD 69.19 million) and Electronic Goods (USD 59.96 million) were the major products imported by India.

During the period April-August, 2005, Indias exports to Canada at USD 363.52 million registered a positive growth of 13.10percent over the corresponding period of the previous year when the exports were USD 321.43 million.

During the period April-August, 2005, Indias imports from Canada at USD 292.34 million registered a positive growth of 42.83percent over the corresponding period of the previous year when the imports were USD 204.67 million.

The thrust areas for increasing Indias export to Canada are: Leather and Leather Goods, Gems and Jewellery, Sports Goods, Chemicals and Pharmaceuticals, Processed Food (both agriculture and marine), Engineering Goods, Auto parts and Ancillaries, Computer Software Packages etc.

Annual Trade Policy Consultation Meeting

In October, 2003, the Prime Ministers of India and Canada had announced the holding of annual Trade Policy Consultation Meetings between the Secretaries of the two countries. The first meeting was held in New Delhi. In the second meeting, which was held on 16th May, 2005 in Ottawa, Canada, consultations covered a range of issues including progress of WTO negotiations, respective bilateral and regional trade policy initiatives, ways to enhance two-way investment flows and trade promotion efforts, and market access irritants.

4.2 Measures Undertaken for Export Promotion to NAFTA

Dissemination of trade related information with respect to NAFTA partners is coordinated with the Apex Chambers of Commerce / EPCs. Emphasis is laid on the identified important sectors for expansion and consolidation of our trade. The analyzed trade data of NAFTA countries is regularly passed onto the Apex Chambers of Commerce and Export Promotion Councils for dissemination among their member exporters, who are also provided assistance for promoting exports, participation in fairs/exhibitions, identification of export products and potential market areas for exports, details of reputed buyers etc. The difficulties faced by the exporters in NAFTA countries are regularly taken up with the concerned authorities in these countries and the issues are resolved through correspondence, video conferences and meetings. The various legislations/ steps taken by these countries and the possible impact of these measures on Indian exports are analyzed regularly and follow up action is taken in consultation with other Ministries/Departments and our Missions.5. Current Status of Leather Exports from India

India accounts for approximately two percent of the world trade in leather and leather products. To be on the fast track of growth and to have a larger cake in the international business, continuous technology up gradation and modernization are the most powerful driving forces like in any other manufacturing sector that dreams steady growth and expansion. With this being the primary objective, India's Council for Leather Exports (CLE) has taken a number of initiatives. To propel the combined efforts of the tanning and manufacturing sectors, the Central Leather Research Institute (CLRI), the Fashion Technology and Development Institute and CLE as the main cog in the wheel, an action plan has been chalked out. The growing international demand apart, the action plan also suggested measures to face Indian leather's industry's major compt1itors in Asia: China, Indonesia, Korea and Taiwan.

To boost the country's leather industry, the Indian federal government has earmarked a Rs 4.5 billion (USD 95 m) grant to be made available to the industry over a span of five years but that's not without any string. The fund availability is conditional upon the sector's attracting an annual investment of Rs 2.2 trillion. In 2002, investments in the leather sector stood at Rs 410 million. Footwear and their components account for about 25 percent of India's total leather products exports. These two markets also offer Indian leather industry vast scope for exports of Saddlery and harness.

Besides the European market where Indian leather products already enjoy a strong presence, the Germany too is emerging as a very strong and promising export destination for Indian leather industry. Germany today accounts about 25 percent of a massive USD 96 billion global trade in leather and leather products. The importance of European market could be gauged by the fact three major EU countries-Germany, Italy and UK- today accounts for approximately 42-45 percent of leather and leather products exports from India. These three countries together exported leather products worth USD 814.82 m in 2001-02 against country's total leather and leather products exports valued at USD 1.93 billion.

CLE is trying to make a dent in new 1larkets. Focus countries include the Latin American countries, Israel and Japan. Japan is the fifth largest importer of leather & leather products in the world. Japan now imports over USD15 million worth leather and leather products from India. In fact, between 1998 - 99 and 2001-02, India's exports leather products to Japan have more than doubled. According to the latest available provisional data, exports in the first 10 months in fiscal 2002-03 to Japan stood at USD 7.53 million against USD 7.30 m during the comparable period of 2001..02. CLE aims at raising India's share in Japan's total imports of leather and leather products to 2 percent by 2005-06 from the current level of 0.5 percent which in other words means forex earnings to the tune of USD 70 m in next three years from the 2001-02 level of over USD 15 m.

5.1 About Council for Leather Exports (CLE)

The Council for Leather Exports was set up in July 1984. A non-profit company registered under the Indian Companies Act, 1956, the Council functions under the Ministry of Commerce, Government of India. The Council is entrusted with export promotion activities and overall development of the Indian leather industry. The Council's activities also include promoting Foreign Direct Investments and Joint Ventures in the Indian leather industry. The CLE serves as a bridge between Indian leather exporters and buyers all over the world.

Council's Services to the Indian Leather Industry Collecting, collating and disseminating world market intelligence

Updating the information on global trends in fashion & design, product development and adaptation

Dissemination of information of commercial and technological nature through seminars, news bulletins and magazines

Organizing participation of Indian exporters in international fairs and buyer-seller meets Sponsoring sales-cum-study teams and trade delegations

Inviting foreign experts for providing technological inputs to Indian leather exporters

Organizing international leather fairs in India Council's Services to Overseas Buyer

Serving as a focal point for disseminating information on Indian manufacturers and exporters

Organizing visits of buyers' delegations from different countries

Liaising with various international organizations dealing with trade information

Providing trade and commercial information on Indian leather industry

5.2 GLOBAL LEATHER INDUSTRY

The global leather industry is valued at about USD 85 billion.

Most of the producing countries are developing countries, while developed markets such as the Germany are major consumers of leather products. The industry is buyer-driven, with producing countries manufacturing in line with specifications, guidelines and technical advice provided by the buyer countries.

China and Italy are the leading producing and exporting nations in the world with exports worth USD 19 billion and USD 13 billion respectively. India, with an output of USD 4 billion and exports of USD 2.4 billion, is placed third. The leather industry occupies a prominent place in the Indian economy in view of its substantial export earnings, employment potential and growth. The industry provides employment to about 2.5 million people, of which 30 per cent are women.

Exports have risen from USD 1604 million in 1999-2000 to USD 2379 million in 2004-05 at a CAGR of 8 per cent. India has a 2.32 per cent share in the global leather trade and ranks eighth in the world in terms of the countries foreign exchange earnings from the industry.

The composition of exports has also been changing, with more and more value added products being exported. In 2004-05, for example, value added finished products constituted around 80 per cent of the total exports from the industry, a far cry from 7 per cent in 1956-57. The value addition is at present to the tune of 200 to 500 per cent. India has plans to double its leather exports over the next 5 years It has been estimated that India has the capacity to meet nearly 10 per cent of global leather requirement.

The Indian leather industry comprises the following key sub-sectors - tanning and finishing, footwear, footwear components, leather garments and leather goods and accessories. A large part (nearly 60-65 percent) of the production is done by the small/cottage sector.

Leather and leather products production is centered in southern, northern and eastern India. Key production units are located in Tamil Nadu, West Bengal, Uttar Pradesh, Punjab, Karnataka, Andhra Pradesh, Haryana and Delhi. Tamil Nadu is the biggest leather exporter in the country with the south accounting for 43 percent of the countrys share. The industry uses primarily indigenous natural resources with little dependence on imported resources. 5.3 Forms of Leather Exported

Finished leather

Footwear and components

Footwear

Components

Leather garments

Readymade Garments

Leather goods

Footwear and Components

The footwear segment includes shoes, slippers and sandals. Shoe uppers and soles are part of the foot wear components. India's per capita annual consumption of footwear is around 1.5 pairs against the per capita annual consumption of approximately 5 to 6 in developed countries like GERMANY & UK. As leather footwear is costlier than other substitute material footwear made from PVC, PU, Rubber, TPR etc., and the leather footwear segment accounts for less than 25 per cent of the total footwear market in India. Thus, the per capita consumption of leather footwear is less than 0.5 pairs The domestic production of leather footwear and components has increased, from approximately 430 million pairs in 1991-92 to 565 million pairs in 1994-95.

In future, the domestic demand is estimated to grow at a faster pace due to a rise in urban population, rise in middle class population which has already crossed the 200 million mark. A number of large players (with a few having tied up with international players) have entered the shoe market and are developing brand culture in this segment. The major domestic players in footwear are Bata, CSC, Aero, Liberty, Masco, Wasan, Phoenixes. The exports (especially of shoe components) are also likely to grow, with a number of large players setting up units with 75 per cent export commitment. Increasingly major multinationals are shifting their production base to countries with cheap labor costs. The overall demand for this segment is estimated to grow by more than 15 per cent p.a. in future. As part of the liberalization process, the government has permitted the setting up of shoe and component manufacturing units by large players, with an export commitment of 75 per cent.

Leather Garments and Leather Goods

The leather garments industry includes manufacture of jackets, trousers, skirts etc. Leather goods include belts, wallets etc. The domestic production of leather garments and leather goods was 3 million and 73 million pieces respectively. The bulk of leather garments production is meant for export, due to lower domestic consumption on account of weather conditions. India does not have a significant share in the world leather garment market, inspite of its high potential. The future domestic demand for leather garments may not grow as fast as the export demand. However, both the domestic and export demand for leather goods are likely to grow at a fast rate, in future. A few major corporate houses like Hindustan Lever, L&T, Ponds, and Tata Exports etc. have also entered into marketing and exports of leather products.

As far as Saddlery goods are concerned, it is almost based on cottage and small scale units. Kanpur is the only production centre of saddlery goods in India.

The Tanning Industry

The industry has a large tanning capacity per day but it utilizes only 60-70percent of its installed capacity. The turnover of the tanning of the tanning industry is estimated at INR 80-90 billion for the year 1999-2000. The industry produces about 2 billion sq.ft of finished leather of which only 10-15 percent valued at USD 240 million. is exported. The problem relating to effective discharges of effluents which is a WTO compulsion is increasingly threatening the small and medium scale tanneries all over the country. The tanning industry is heavily dependent on indigenous raw hides and skins for its supply of raw materials which is very fragmented. Imports are low despite exemption from customs duties due to high import prices (3-4 times higher) and absence of appropriate machinery to process the imported hides and skins. As international pressures to supply good quality leather products mount, the leather manufacturers would have to increase the use of imported hides and skins to improve the image of Indian Leather and Leather products. In the Indian tannin sector, the tiny units primarily engage in producing semi-finished leather, the small units engage in producing both semi-finished leather and finished leather and the large units are usually fully integrated units. There are many drawbacks in this industry, it needs to upgrade technology, it needs proper finance for high capital investment, poor & erratic Raw material, production and process and infrastructure.

Footwear Industry

There are nearly 4000 units engaged in manufacturing footwear in India. The industry is dominated by small scale units with the total production of 55percent. The total turnover of the footwear industry including leather and non-leather footwear is estimated at INR 85-95 billion including INR1200-14,000 million in the household segment. India's share in global leather footwear imports is around 1.4percent Major Competitors in the export market for leather footwear are China (14percent), Spain (6percent) and Italy (21percent).

Leather Garments & Goods

These two segments are essentially dominated by the small scale sector with LSIs having a very negligible share of less than 3percent in garments. Due to increased export demand, the capacity for the leather garment industry has been rising and is presently 18 million pieces per annum. Production is placed at 12 million pieces per annum with capacity utilization at 60-75percent with an aggregate turnover of INR 22,000 million. The share of leather garments in total exports of leather and leather products has been rising and is presently around 24percent, having grown at CAGR of 9percent, since 1995-96 to reach INR 21,040 million in 2000-01. India's import in world import garments is around 11 percent. Our main competitors are China, Italy and Turkey.

5.4 Export duty Changeable on Indian Leather products

vi. Export duty charged on Indian Leather goods

S.No.

Description of Article

Duty Rate

(percent)

1.

E.I tanned leather

15

2.

Snake skin

10

3.

Finished leather of goat, sheep and bovine animals and of their young ones

Nil

4.

Raw fur Iamb skins

10

5.

(a) Clothing leather fur suede/hair, hair-on suede/shearing suede leathers

Nil

(b) Fur leather

(c) Cuttings and fleshing of hides and skins used as raw materials for manufacturing animal glue gelatin

Nil

6.

Luggage leather-case hide or side/suit case/hand bag luggage/cash bag leather

25

7.

Industrial leathers, namely:

15

(a) Cycle saddle leathers

15

(b) (i)Hydraulic/packing /belting/washer leathers

25

(ii) Industrial harness leather

15

8.

Picking band leathers

159.

Strap/combing leathers

1510.

Miscellaneous leathers, namely :

(a) Book binding leathers

Nil

(b) Skiver leathers

Nil

(c) Transistor case/camera case leathers

25

11.

Fur of domestic animals, excluding Iamb fur skin

Nil

12.

Shoe upper leathers, namely:

(a) Bunwar leather

Nil

(b) Kattai/slipper /sandalleather

Nil

(c) Chrome tanned sole leather

Nil

5.5 Global Exports vis--vis India's Export

The global trade in leather and leather products increased over the years and has reached USD 88 billion in 2004

The export of Indian leather and leather products grew manifold over the past three decades and its current share in global trade is 2.51 percent.

In world import of leather, India's share is 2.24percent. the major exporting countries of leather and their shares are Italy 23.39percent, Korea 9.60percent, the GERMANY 6.80percent, Argentina 6.11percent, and Germany 5.72percent, whereas India's share in world import of leather footwear is 1.43percent.

The major exporting countries of leather footwear and their shares are Italy 16.62percent, China 15.00percent, Portugal 5.63percent, Spain 5.600,/0, Brazil 4.28percent, Indonesia 3.61percent, Germany 3.'6percent, Belgium Luxembourg 2.69percent, the UK 2.56percent etc. In world import footwear components, India's share is 4.96percent. The major exporting countries of footwear components and their shares are Italy 20.12percent, Korea 7.80percent, China 7.45percent, The GERMANY 6.98percent , Romania 5.74percent, Germany 4.63percent, Tunisia 3.15percent etc. .

In world import of leather garments, India's share is 11.17percent The major exporting countries of leather garments and their shares and China 39.22percent , Pakistan 9.24percent, Turkey 7.10percent, Italy 7.02percent, Germany 5.02percent , Korea 4.98percent, the GERMANY 2.54percent etc.,

In world import of leather goods, India's share is 7.08percent. The major exporting countries of leather goods and their shares are Italy 21.65percent, China 16.52percent, France 11.51 percent, the GERMANY 5.22percent, Greece 4.83percent, Thailand 4.62percent, Germany 3.69percent etc.

In world import of leather gloves, India's share is 9.62percent. The major exporting countries of leather gloves and their shares are China 35.77percent, Pakistan 2.62percent, Germany 2.02percent, Italy 1.92percent, Hungary 1.57percent, Mexico 1.20percent etc.

In world import of saddlery & harness, India's share is 8.27percent. The major exporting countries of saddlery & harness and their shares are China 14.27percent, Germany 11.34percent, the UK 10.55percent, the GERMANY 7.41percent, Denmark 3.96percent, Mexico 3.68percent, Italy 3.68percent etc.

In world import of non-leather footwear, India's share is 0.08percent. The major exporting countries of non-leather footwear and their shares are China 26.03percent, Italy 6.73percent, Belgium-Luxemburg 4.35percent, Indonesia 3.49percent, Spain 2.61percent, France 2.06percent, Thailand 1.79010, etc.

India has stiff competition in international market from countries like China, Vietnam, Thailand, Indonesia, etc., which are emerging as major manufacturing countries.

6. GERMANY Country Profile

6.1 Economic Overview

GDP

Consumer spending decelerated, increasing 2.5 percent after increasing 4.8 percent. The slowdown in consumer spending accounted for more than half of the slowdown in real GDP growth.

Business investment in equipment and software turned down, decreasing 1.0 percent, following a 15.6- percent increase.

Exports decelerated, increasing 3.3 percent after increasing 14.0 percent.

Inflation, as measured by prices for domestic purchases, increased 4.0 percent in the second quarter after increasing 2.7 percent. Excluding food and energy, prices increased 2.9 percent, following a 3.0-percent increase.

Personal Income

Wages and salaries, the largest component of personal income, increased

0.6 percent in June after remaining unchanged in May. Growth turned

Up in private industries, reflecting a strong upturn in services industries.

Interest and dividend income rose only slightly more than the previous month.

Proprietors income increased 0.1 percent, after increasing 0.7 percent.

Balance of Payments

The U.S. current-account deficit decreased USD14.4 billion to D208.7 billion (preliminary) in the first quarter of 2006.Exports

Exports of goods and services increased USD 2.4 billion in June to USD120.7 billion, reflecting an increase in goods exports. Services exports decreased.

The increase in goods exports reflected increases in all major categories. The largest increases were in capital goods, industrial supplies and materials, and automotive vehicles, parts, and engines.

The decrease in services exports reflected decreases in travel and other private services.

Imports

Imports of goods and services increased USD2.2 billion in June to USD185.5 billion, as both goods imports and services imports increased.

The increase in goods imports was more than accounted for by increases in consumer goods and automotive vehicles, parts, and engines. Industrial supplies and materials and capital goods decreased.

The increase in services imports mostly reflected increases in royalties and license fees and passenger fares.Industrial GrowthReal growth in the services sector slowed to 4.1 percent in 2005 due primarily to slower growth in information and real estate and rental and leasing.

Manufacturing increased 4.0 percent in 2005 and accounted for over 90 percent of the 2.6 percent growth in the goods sector.

Information-communications-technology producing industries comprised less than 4 percent of GDP and accounted for nearly 13 percent of real GDP growth.

vii. Economic Indicators of United States

Indicator

Previous

Current

Per Capita Income (at Nov. 2005 currency rates)

27,551

27,640

Farm Sector Income 72.6

56.2

Poverty 12.5percent

(2003 Census)

12.7percent

(2004 Census)

Consumer Price Index 0.4

March 2006

0.6

April 2006

Producer Price Index 0.5

March 2006

0.9

April 2006

Crude Oil Prices (USD/barrel)

70.38

April 28, 2006

72.14

May 5, 2006

Change in Gross Domestic Product 4.1percent

3rd Qtr 2005

1.1percent

4th Qtr 2005

Change in Corporate Profits 4.6percent

2nd Qtr 2005

(-) 4.0percent

3rd Qtr 2005

Change in Personal Consumption Expenditures 0.9percent

November 2005

0.9percent

December 2005

(Figures in USD)

Source: http://www.whitehouse.gov

6.2 Trade Policy Developments

On 18 May 2005, the Germany Committee for the Implementation of Textile Agreements (CITA) announced to invoke safeguards on four categories of textiles and clothing imports from China, including men's and boys' cotton and man-made fiber shirts, not knit (category 340/640), man-made fiber trousers (category 647/648), man-made fiber knit shirts and blouses (category 638/639), and combed cotton yarn (category 301

As a result, on A will request consultations with China on these products and, on the date those consultations are requested, will put in place quotas that will limit the growth in imports of the covered products. The quota level will be 7.5percent above the amount of imports of these products from China entered during the first 12 months of the most recent 14 months preceding the month in which the request for consultations is made. The quota level will be prorated to respond to the number of days left in the year as of the

date of the request for consultations. Consultations must be held within 30 days of China's receipt of the request, and will last for a maximum of 90 days. In the event a mutually satisfactory solution cannot be reached by the conclusion of the consultations period, the quotas will remain in place through the end of 2005.

On 13 May 2005, CITA announced to invoke safeguards on three categories of textiles and clothing imports from China, including cotton knit shirts and blouses, cotton trousers, and cotton and man-made fiber underwear. On 28 April 2005, CITA also agreed to consider the textile safeguard petitions submitted on 6 April by a coalition of textile industry groups. The products targeted by the petitions and subject to consultation are as follows: men's and boys' cotton and man-made fiber woven shirts; cotton and man-made fiber sweaters; cotton and man-made fiber brassieres; cotton and manmade fiber robes and dressing gowns; other synthetic filament fabric; man-made fiber knitted shirts and blouses; and manmade fiber trousers.

In a related development, the Germany Court of Appeals for the Federal Circuit (CAFC) issued an order on 27 April lifting the preliminary injunction issued by the Court of International Trade (CIT) on 30 December 2004. As such, CITA has resumed consideration of the threat-based safeguard petitions submitted by the domestic industry during the fourth quarter of last year until the courts decide the case of its merits. These petitions include cotton yarn, cotton trousers, man-made fiber trousers, men's and boys' wool trousers, cotton shirts, man-made fiber shirts, men's and boys' cotton and man-made fiber woven shirts, cotton and man-made fiber underwear and other synthetic filament fabric; knitted fabrics, cotton and man-made fiber brassieres and cotton and man-made fiber robes and dressing gowns.

On 22 October 2004, the CITA determined that the Germany market for socks (Categories 332/432 and 632 Part) was being disrupted by imports from China, and that this situation threatens to impede the orderly development of trade in these products. As a result, CIT A has established a twelve-month limit on socks from China from 29 October 2004 to 28 October 2005.

On 5 April 2005, the Germany Department of Commerce (DOC) announced two major changes to AO practices involving non-market economy (NME), including China. Under the new practice, application for a separate AD rate will no longer be made by completing and returning the Section A of the questionnaire to the DOC. Instead, an applicant should complete an application form which will be posted for each investigation on DOC's website. In addition, each exporter applying for a separate rate will be required to list all the suppliers whose merchandise they export to the Germany during the period of investigation or review. The dumping margin assigned by the DOC to an exporter will be a combined rate, which is calculated from the rate of the exporter and those of the producers' which supplied merchandise to it for export to the Germany.

Trade Rules and Regulations

Goods brought into the Germany are often subject to import duties, but import licenses are generally not required. There are no foreign exchange controls over payments for imports.

Imports are usually subject to ad valorem and/or specific import duties. Regular rates are applied on imports from locations enjoying normal trade relations (NTR) or formerly most favored-nation status, including Hong Kong and the Chinese mainland. Products from some countries receive preferential import treatment via the Germany Generalized Scheme of Preferences (GSP). CBP has final authority on tariff classification for duty rates purposes.

The Germany rigorously enforces laws on dumping. When the DOC determines that a class of foreign goods is being, or is likely to be, sold to purchasers in the Germany at less than its fair value, an antidumping duty investigation may be conducted. The USITC is responsible for conducting the final injury investigation. If all the determinations are affirmative, the DOC will issue a duty order.

Imported goods are usually required to be marked with the country of origin in English. The marking has to be permanent, legible and conspicuous. Additional labeling is required on food, cosmetics, textiles and apparel, selected household products and flammable fabrics.

Certain imported products must be approved by the proper Germany authority. For example, certification by the Underwriters' Laboratory or ETL Testing Laboratories must be obtained for electrical appliances, gas equipment and fire prevention apparatus. Under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES), the Germany requires specific documents for fur imports.

6.3 INDO-Germany LEATHER TRADE

Though Germany is the second largest importer of Indian leather and leather products after Germany and UK, the Indo-Germany trade during the year 2004-05 has seen a significant jump with 11.18 percent over and above the previous year 2003-04 trade value. The footwear segment alone posted a growth of 15 percent over the previous year.

India's share in Germany leather garment sector in 2003 was 3.23percent, while during the same year, leather goods accounts for 4.27percent and saddlery & harness 4.42percent. The share of footwear is just above 1 percent. Therefore, there is immense potential for Indian footwear in the Germany market, said Rafeeque Ahmed, chairman of CLE.

World leather and leather products market in 2003 was USD88 billion., out of which, footwear constituted for USD 53 billion (60percent). The rest are leather garments and accessories. Out of this nearly half the size of world footwear market (30percent world footwear) is in Germany, the volume of which during 2003 was USD16, 083 million. It is this segment, which is aimed by the Indian footwear companies to increase their exports to Germany.

6.4 GOVERNMENT OF INDIAS INITIATIVE

Ministry of Commerce, Government of India, has identified Germany as one of the "Focus Markets" and is assisting CLE and individual exporters to reach the Germany footwear market.

CLE has engaged a marketing consultant MIs Footwear Consulting Group in 2002 to chalk out the marketing strategy for the Germany market. As part of this strategy, CLE has been taking part in WSA Fair in Las Vegas every year from 2002 and showcased Indian products. CLE has also organized several Buyer-Seller-Meets (BSMs) during the WSA fairs As a result, Wal-Mart, the biggest Retailer Stores of Germany visited India during Nov 2003 and since then started outsourcing from Indian companies. Today, Wal-mart is sourcing its products from at least five Indian firms and the trade turnover for Wal-Mart operations alone is expected to touch USD 80 million to USD l00 million in 2006.

7. CANADA Country Profile

7.1 About the Country

A land of vast distances and rich natural resources, Canada became a self-governing dominion in 1867 while retaining ties to the British crown. Economically and technologically the nation has developed in parallel with the Germany, its neighbor to the south across an unfortified border. Canada's paramount political problem is meeting public demands for quality improvements in health care and education services after a decade of budget cuts. The issue of reconciling Quebec's francophone heritage with the majority Anglophone Canadian population has moved to the back burner in recent years; support for separatism abated after the Quebec government's referendum on independence failed to pass in October of 1995.

7.2 Economy - Overview

As an affluent, high-tech industrial society, newly entered in the trillion dollar class, Canada closely resembles the Germany in its market-oriented economic system, pattern of production, and affluent living standards. Since World War II, the impressive growth of the manufacturing, mining, and service sectors has transformed the nation from a largely rural economy into one primarily industrial and urban. The 1989 Germany-Canada Free Trade Agreement (FTA) and the 1994 Germanyn Free Trade Agreement (NAFTA) (which includes Mexico) touched off a dramatic increase in trade and economic integration with the Germany. Given its great natural resources, skilled labor force, and modem capital plant Canada enjoys solid economic prospects. Solid fiscal management has produced a long term budget surplus which is substantially reducing the national debt, although public debate continues over how to manage the rising cost of the publicly funded healthcare system. Exports account for roughly a third of GDP. Canada enjoys a substantial trade surplus with its pr41cipal trading partner, the United States, which absorbs more than 85percent of Canadian exports.

viii. Economic Indicators of Canada in 2006

Indicator

Unit

Value

Population Estimate - Canada

-

32,501,147

Consumer Price Index - Total

1992=100

130.5

Unemployment Rate

percent

6.4

Real GDP Growth Rate

percent

2.9

Target for the Overnight Rate1percent

4.25

Prime Interest Rate2percent

6.0

Employment

-

16,504,800

Labour Productivity - percent Change, Seasonally Adj.

percent

0.5

Corporate Operating Profits

CAD

56,100,000,000

Merchandise Imports

CAD

32,807,000,000

Merchandise Trade Surplus

CAD

4,748,000,000

Real Gross Domestic Product

percent Change

0.9

Money Supply (M1)

CAD

150,019,000

Industrial Product Price Index

1997=100

113.7

Source: http://www.canadianbusiness.com

7.3 Trade PolicyCanada maintains a liberal trade regime. There are no foreign exchange restrictions, and import licenses are only required for a limited number of goods. Imports are generally subject to import duties.

Import licenses are required for items regulated under the Export and Import Permits Act. The Act lists various agricultural products (poultry, eggs, and dairy products), a number of textile and clothing items, and certain steel products.

The importation of certain commodities is however tightly controlled. Examples of regulated goods include: food products, clothing, drug and medical devices, hazardous products, some offensive weapons and firearms, endangered species and motor vehicles.

As agreed in the Agreement on Textiles and Clothing (ATC), the majority of textile and clothing products of Hong Kong origin are subject to import quotas by Canada. In compliance with the Phase 3 of the ATC liberalization process, effective from January 1, 2002, Canada removed 9 categories of Hong Kong textile and clothing products fully/partially from quota restrictions. According to the ATC, all quotas on textiles and clothing will be eliminated by 1 January 2005.

Duties are assessed on the transaction value (the price actually paid or payable for the goods), including commission, brokerage, packing, royalties and transportation to the Canada point. Hong Kong and China origin goods are eligible for the preferential tariffs under the Canadian General Preferential Tariff (GPT) Scheme.

A provincial sales tax (PST) is assessed on all imports to British Columbia (7.5 percent of the duty paid value), Manitoba (7 percent), Ontario (8 percent), Prince Edward Island (10 percent), Quebec (7.5 percent) and Saskatchewan (6 percent). Additionally, a broad-based value-added sales tax, known as the goods and services tax (GST), is levied at 7percent. In the three Atlantic provinces (Newfoundland, New Brunswick and Nova Scotia), the PST and GST were combined in April 1997 to form a harmonized sales tax (HST) at a standard rate of 15percent for all goods and services. In addition, excise taxes are charged on goods such as tobacco; wine; jewellery; some heavy automobiles; automobile air conditioners; and gasoline, diesel fuel, aviation gasoline and aviation fuel.

Canada may impose anti-dumping duties on imports considered to be priced less than the "nominal" price charged in the exporter's domestic market and caused material injury to the concept industry in Canada. Currently, Canada imposes anti-dumping duty on seven items from the Chinese mainland, including waterproof rubber footwear; women's leather and non-leather boots; bicycles; garlic; hot-rolled carbon steel plate and sheet; waterproof footwear and bottoms; leather footwear (metal toecaps); xanthenes and steel pipe nipples, couplings and fittings.

Canada requires bilingual labeling (English and French) for most products. Bilingual designation of the generic name on most pre-packaged consumer products is required under the federal Consumer Packaging and Labeling Act. Under this Act, the product identity declaration, net quantity declaration and dealer's name and principle place of business must appear on the package/label of a consumer good sold in Canada.

The agency responsible for inspection of imports, Canada Customs and Revenue Agency, also requires an indication of the country of origin on several classes of imported goods. Goods not properly marked will not be released from Canada Customs \ll1til suitably marked. In general, environmental claims that are ambiguous, misleading or irrelevant, or that cannot be substantiated, should not be used.

RESEARCH METHODOLOGY

Nature of StudyThe Thesis study in subject now is an exploratory study with a touch of descriptive research. Fundamentally it is a Secondary Data Study.

Data Collection

Types of Data Collected

The data collection technique is solely secondary. The following types of secondary date have been collected and used for the study.

Quantitative

Qualitative

Descriptive data

Insightful information

Data Collection Procedure

Qualitative and descriptive data where ever sought were collected and excerpts from such article or reports have been put together. Those pieces of data are patched together in the logical flow. Then the paragraph is rephrased to fit into the required context.

In case of Quantitative data the pieces of data have been dumped together. Then such data is sanitized for consistency and reliability. Then such cluster of quantitative data is used according to the situation demands, in a logical flow.

To explain it in a lucid manner, let us consider an example of collecting Data tables that represent the break-up of the imports in the Demand Side Analysis section in this report. First of all a big dashboard of table was copied from the source, then the unwanted rows and columns were removed from it. The currency has been converted into the uniform template. Then the sum total of such data has been obtained from following the above stated steps.

Mode of Data Collection

Internet is the only source for obtaining the data for this Thesis. However for converting the data into the Germanyble format and context MS Word and MS Excel have been extensively used.

Type of Data Analysis

Analytical Tools

Simple mathematical, statistical and business tools have been used for analysis of this study.

Examples of Tools Used

Simple Percentages and growth rates have been used as a part of Mathematical tools.

Using statistical tools like GAP, the complex data has been tabulated and drawn into charts and analyzed subsequently.

As a part of business tools, SWOT analysis has been adopted for classifying and understanding the qualitative data and hence coming out with the required conclusions. Considerations

The study must include all the basic knowledge about the industry and Economies involved in the study. For this purpose, an extensive understanding of the different aspects of links involved in the whole value chain of the study had to be carried out. Once the reader felt the gasp of the topic and nitty-grittys involved, I have introduced him to various combination of the quantitative data relevant to the topic. Then it is time to summarize and identify the key pieces of information. The right kind of analytical tools (Gap analysis and SWOT in this case) have to be identified which would take us to the conclusions.

ANALYSIS8. Supply Side Analysis

8.1 Quick Facts About Indian Leather Market

India is the country with largest livestock, holding 21 percent large animals and 11percent small animals.

A source for 10percent global leather requirements.

Annual production value over USD 4 billion.

Annual export value over USD 2 billion.

Export growth CAGR 8.20percent (2000-04).

About 2.50 million workforces (30percent women).

Promising technology inflow and Foreign Direct Investment

Top priority to occupational safety and work environment

Enormous potential for future growth (domestic as well as export)

ix. Sources of Production of Leather

Name of the State

Locations

Andhra Pradesh

Hyderabad, Guntur, Vijayawada, Rajamundry, VizianagaramBihar

Ranchi, Muzzafarpur, Biharishariff, Patna, Dharbhang GayaGujarat

Ahmedabad, Sarvakundala, Junnagadh, Rajkot, Bharuch, Surat, Baroda

Jammu & KashmirSrinagar, Anantanag, JammuKerala

Trivandrlun, Trichur, Quilon, Calicut, Emakulam

Madhya Pradesh

Bhopal, Indore, Gwalior, Jabalpur

Maharastra

Bombay, Sholapur, Kolhapur

RajasthanJaipur

Tamil Nadu

Timchi, Madras

Uttar Pradesh

Kanpur

West BengalCalcuttaAssamGuwahatiMeghalaya

ShillongKarnataka

Bangalore, BelgaumDelhi

Delhi

Punjab

Jalandhar, AmritsarOrissaCuttak, Berhampur

I. Important Hubs for Leather Production in India

Source: http://ibef.org

Livestock

The total number of live stock including Buffalos, Sheep, Goats, Pigs, Horses and Ponies, Mules, Donkeys, Camel, Yaks and Mithun available as on 2003 in India were 485 million. The value of output of the Livestock was worth INR 24.33 billion.

8.2 Market Size

The Indian leather exports are targeted to grow from the present size of USD 2.4 billion to over USD 5billion by 2010.

x. Category-wise Leather Producing Firms

Name of the Category

Number of firms

Barcodes, Stickers & Labels

406

Fashion And Designer Bags

614

Finished Leather

600

Footwear, Shoes, Components & Accessories

895

Horse & Animal Clothings and Accessories

97

Leather Bags, Purses, Wallets & Cases

1024

Leather Chemicals

103

Leather Diaries, Journals, Notebooks & Other Leather Stationery Items

67

Leather Garments

528

Leather Goods & Accessories

1524

Leather Laces, Cords, Threads, Straps & Other Leather Craft Supplies

43

Merchant Traders

243

Miscellaneous Garment, Textile & Leather Accessories

1577

Threads, Laces, Pads, Linings & Other Sewing Accessories

445

Total number of firms

8166

Source: http://dir.indiamart.com

Estimated Production Capacity of the Indian Leather Industry

xi. Leather Production by Category

Product

Capacity (million pieces per annum)

LeatherHides

65

Skins

170

Leather ProductsLeather Footwear

909

Leather Shoe uppers

100

Non-leather Footwear

1056

Leather Garments

16

Leather Goods

63

Industrial Gloves

52

Saddlery

0.10

Source: http://www.leatherindia.org

8.3 Performance of Leather Exports in the Past

Export of leather and leather manufactures recorded a marginal decline of 1.0percent during April-November, 2005. The value of export decreased to INR 6812 0 million from INR 6876 0 million during the corresponding period of the previous year. While exports of leather manufactures registered a decline of 6.9percent, exports of Leather Footwear increased by 11.0percent in 2004-05.

Exports by Product Category

II. Breakup of Total Indian Leather Exports in 2005 - 06

xii. Value of Indian Leather Products Exported During 2005 06

CATEGORY

APR-MAR

2004 - 05

APR-MAR

2005 - 06

Percentage

Variation

Finished Leather

607.73

606.06

-0.28percent

Leather Footwear

657.78

786.76

19.61percent

Footwear Components

179.21

179.04

-0.10percent

Leather Garments

329.44

328.44

-0.30percent

Leather Goods

585.72

649.14

10.83percent

Saddlery and Harness

61.71

76.40

23.81percent

Non Leather Footwear73.78

68.75

-6.82percent

TOTAL

2495.37

2694.59

7.98percent

(Figures in million USD)

Source: http://www.leatherindia.org

Looking at the Indian exports of various product categories to the world in the recent past, there is no doubt with the fact that there has been some continual growth in the volumes of leather goods. And there has been consistency in the share of Finished Leather, Leather Footwear and Non-Leather Footwear in the total exports has been consistent.

III. Value of Leather and Leather Products Exported During 1999 - 2005

Derived: http://www.leatherindia.org

Indian Exports by Geographic Locations

xiii. Some of the Top Destinations Including Canada for Indian Leather Exports

(Figures in million USD)

COUNTRY

1999- 2000

2000- 01

2001- 02

2002-03

2003-04

2004-05

GERMANY

258.24

342.78

286.89

246.44

251.58

279.70

Germany

293.59

307.17

304.46

272.53

329.82

336.69

UK

266.29

270.09

248.89

240.96

250.65

299.21

Italy

165.47

241.07

263.11

255.92

285.02

242.60

Spain

66.72

100.75

101.30

110.56

161.23

169.21

Hong Kong

55.22

98.32

121.43

165.70

226.97

236.52

France

84.36

90.68

89.72

88.43

109.82

132.73

Netherlands

44.17

55.56

60.50

50.95

57.75

63.32

Canada

21.42

26.66

27.81

24.81

25.59

28.19

Others

94.37

122.48

132.78

131.34

179.55

209.30

TOTAL

1604.35

1963.5

1936.4

1875.21

2216.45

2379

Looking at the Indian leather exports to various geographies, we can make out that Germany, Germany and UK have been biggest markets for leather exports to it. In the year 2005, Germany have occupied third position in terms of volumes of world leather exports from India and Canada occupies 9th position.

Indias Leather Imports

India is not only an exporter of leather but also an active importer of raw and processed leather.

xiv. Leather Imports by India

Commodity

Apr Mar

2004 05

Apr Mar

2005 06

Percentage Growth

Raw Hides and Skin

50.21

58.08

15.66percent

Leather

212.70

232.41

9.27percent

TOTAL

262.91

290.49

10.49percent

(Figures in million USD)

Source: http://commerce.nic.in

8.4 Trade with Germany

Here we consider the volumes of leather exports to Germany and its share in the total world exports from India. The figures show that Germany had a considerable share in Leather Footwear exports and comparatively higher share in Leather category as well. In Raw Hides and Skins Germanyn region had a meager share in 2005.

xv. Exports of Broad Categories of Leather to GERMANY and Canada from India

(Figures in million USD)

Product Category

Period

GERMANY

CanadaTotal

Exports

Leather

FY: 2004-05

12.72

1.70

607.73

FY: 2005-06

11.82

1.32

606.06

Share in category exports in 2005-06

1.95percent

0.22percent

100percent

Percentage change during last two years

-7.05percent

-22.67percent

-0.28percent

Leather Footwear

FY: 2004-05

93.18

7.70

657.78

FY: 2005-06

119.17

9.81

786.76

Share in category exports in 2005-06

15.15percent

1.25percent

100percent

Percentage change during last two years

27.89percent

27.35percent

19.61percent

Footwear Component

FY: 2004-05

1.54

1.30

179.21

FY: 2005-06

1.89

1.45

179.04

Share in category exports in 2005-06

1.06percent

0.81percent

100percent

Percentage change during last two years

22.93percent

12.26percent

-0.10percent

Raw Hides

&

Skins

FY: 2004-05

0.87

0.08

50.21

FY: 2005-06

1.86

0.07

58.08

Percentage change during last two years

113.23percent

-18.76percent

15.66percent

8.5 Competitive Scenario

Indias Ranking in the World Leather Exports

India stands 8th in the worlds exports, considering its value of leather exports as a share of worlds total Leather exports (supplies)

xvi. Top 10 Exporters of Leather as a Share of the Worlds Exports

Country

2000

2001

2002

2003

2004

CHINA (%)

18.78

19.50

21.57

22.46

23.44

ITALY (%)

16.79

17.42

17.27

16.79

16.85

HONG KONG (%)

13.82

12.47

12.17

11.20

11.12

FRANCE (%)

3.45

3.61

3.71

3.91

4.14

GERMANY (%)

3.22

3.42

3.89

3.75

3.96

BRAZIL (%)

3.32

3.47

3.42

3.24

3.61

SPAIN (%)

3.36

3.51

3.75

3.50

3.36

INDIA (%)2.76

2.61

2.51

2.57

2.61

GERMANY (%)

3.01

2.72

2.51

2.28

2.55

BELGIUM (%)

2.09

2.56

2.75

2.44

2.39

TOTAL EXPORTS

73163.7

75343.7

74920.3

85650.0

91586.8

(Figures in million USD)

Derived from: http://www.leatherindia.org

India stands 4th, when considered its value of Leather exports as a share of worlds total Leather imports (demand).

xvii. Top 10 exporters of Leather as a Share of the Worlds Imports

Country

2000

2001

2002

2003

2004

CHINA (%)17.77

18.23

19.73

21.42

21.99

ITALY (%)

15.89

16.28

15.80

16.0

15.81

BRAZIL (%)

3.14

3.25

3.13

3.09

3.39

INDIA (%)2.54

2.40

2.29

2.47

2.44

ROMANIA (%)

1.09

1.31

1.55

1.74

1.71

KOREA REP. (%)

3.19

2.68

2.23

1.81

1.63

INDONESIA (%)

2.49

2.16

1.60

1.48

1.53

TAIWAN (%)

1.97

1.63

1.59

1.39

1.26

TOTAL IMPORTS

77331.26

80602.47

81895.61

89825.08

97606.18

(Figures in million USD)

Derived from: http://www.leatherindia.org

Indias Share in the Global Imports of Leather Products

Indias shares in the world-wide imports of various leather product categories are as follows:xviii. Indias Share in the Broad Categories of Global Leather Imports

Category

Details

1999

2000

2001

2002

2003

CAGR previous 5 years

LeatherW.I

12789.88

14965.69

16197.23

15882.95

17052.57

5.58

%

1.88 5 %

2.55 %

2.84 %

3.20 %

3.26

15.99

Leather Footwear

W.I

26901.92

27598.13

28908.00

30600.23

33297.17

4.53

%

1.40 %

1.38 %

1.37 %

1.38 %

1.66 %

11.54 Footwear ComponentsW.I

4537.86

4446.66

4598.18

4374.37

4612.19

-0.02

%

4.74 %

5.35 %

5.09 %

4.00 %

3.50 %

-7.47 Leather GarmentsW.I

3162.00

4457.92

4771.19

4223.19

4131.86

4.70

%

10.98 %

10.33 %

7.94 %

6.44 %

7.29 %

-4.39 Leather GoodsW.I

5366.96

5862.81

6173.66

6601.73

7412.44

7.01

%

5.19 %

5.86 %

5.21 %

5.08 %

5.44 %

5.31 Leather GlovesW.I

1336.72

1391.41

1358.07

1364.58

1470.07

-0.36

%

7.32 %

6.94 %

6.31 %

6.60 %

9.25 %

7.61 Saddlery & HarnessW.I

416.60

447.84

464.07

497.99

593.81

9.40

%

8.19 %

9.53 %

7.68 %

8.77 %

8.88 %

10.02

TOTALW.I

54511.97

59170.47

62470.42

63545.05

68570.14

4.61

%

2.92 %

3.29 %

3.06 %

2.91 %

3.15 %

5.72

[W.I World Imports (million USD)] [percent - Indias exports as a percentage of W.I]

8.6 Exports Promotion Measure for Leather Industry in India

As a part of the promoting measures of Leather and Footwear exports, following initiatives have been announced by ministry of commerce in the 2006- 2009 Foreign Trade Policy.

Leather and Footwear

Duty free import entitlement of specified items shall be 5percent of FOB value of exports during the preceding financial year.

The duty free entitlement for the import of trimmings, embellishments and footwear components for footwear (leather as well as synthetic), gloves, travel bags and handbags shall be 3percent of FOB value of exports of the previous financial year. The entitlement shall also cover packing material, such as printed and non printed shoeboxes, small cartons made of wood, tin or plastic materials for packing footwear.

Machinery and equipment for Effluent Treatment Plants shall be exempt from basic customs duty.

Re-export of unsuitable imported materials such as raw hides & skins and wet blue leathers is permitted.

CVD (Countervailing Duty) is exempted on lining and interlining material notified at S.No 168 of Customs Notification No 21/2002 dated 01.03.2002.

CVD is exempted on raw, tanned and dressed fur skins falling under Chapter 43 of ITC (HS).

Approval for 117 (includes multi-product Zones) new SEZ s have been already given, these SEZs would work with private sector coordination. Out of those 117 SEZs , 6 SEZs are already operational.

Problem Areas in Export Promotion Measures

No separate SEZ for promotion of Leather Exports

Neither SEZs nor EOU are designed for the development of leather industry

9. Demand Side Analysis

9.1 Germanys Total Leather Imports

xix. Value of the Leather Apparel Imported by the U.S. in the Recent Past

Country

2000

2001

2002

2003

2004

2005

China

1,193.6

1,258.2

1,081.

1,061.3

916.9

801.4

Italy

86.3

108.2

88.5

86.2

75.3

67.3

India

128.8

129.4

77.3

69.7

68.8

50.1

Pakistan

70.3

66.6

67.3

59.9

47.1

41.1

Turkey

22.7

24.8

21.7

21.4

13.0

13.8

France

13.7

14.2

13.0

11.9

10.4

9.1

Canada

23.4

19.2

15.6

13.1

11.3

9.1

Hong Kong

12.0

15.7

11.1

12.0

10.2

7.0

Korea

67.6

42.4

28.4

169

11.8

5.2

Indonesia

71.8

71.1

45.1

9.9

7.1

4.1

Switzerland

0.6

1.2

0.1

0.2

2.8

3.5

Mexico

5.5

4.1

3.6

3.1

3.8

3.3

Romania

0.5

1.3

1.8

1.0

1.2

2.0

Poland

1.1

2.3

1.4

1.0

1.8

1.6

Germany

2.5

2.1

1.5

1.5

1.2

1.5

Spain

2.5

2.5

2.3

2.0

1.6

1.5

United Kingdom

2.9

2.5

2.7

2.7

1.6

1.3

Slovenia

1.1

2.6

0.9

1.6

1.3

1.1

Ukraine

0.02

0