How Will US Tariffs Impact India's Leather Industry Revenue?
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Synopsis
India's leather industry is bracing for a significant revenue decline due to US tariffs. Yet, there’s hope on the horizon with a new Free Trade Agreement with the UK and GST reductions that could ease some financial pressures. Explore how these changes could reshape the industry landscape.
Key Takeaways
- Projected revenue decline of 10–12 percent for India's leather industry.
- Impact of US tariffs on exports.
- Free Trade Agreement with the UK offers new opportunities.
- GST reduction from 12 percent to 5 percent aids working capital.
- Lower interest rates to boost domestic consumption.
New Delhi, Oct 23 (NationPress) The Indian leather and associated products sector is expected to face a revenue decline ranging from 10–12 percent in the current fiscal year due to the tariffs imposed by the United States, according to a report released on Thursday. However, the Free Trade Agreement (FTA) with the UK and recent reductions in GST are anticipated to offer some relief to leather exporters.
This revenue contraction is projected even amidst a slight uptick in domestic demand, spurred by the rationalization of GST and other positive macroeconomic elements, such as lower income taxes, moderate inflation, and low interest rates, as highlighted by the report from CRISIL Ratings.
The agency also forecasted a potential effect of 150–200 basis points on operating margins, coupled with a deterioration in credit profiles.
The leather industry is estimated to generate revenue of Rs 56,000 crore in FY25, with exports contributing to 70 percent of this revenue.
Despite this decline, the agency predicts that companies' leverage levels will remain stable. The GST reduction on intermediate leather goods from 12 percent to 5 percent should alleviate some pressure by lowering both working capital requirements and dependency on external debt.
The lack of significant debt-financed capital expenditures will also help maintain leverage levels, according to the agency.
The ability to redirect exports to alternative markets and re-export through Europe could influence companies' earnings.
“The recently established Free Trade Agreement (FTA) with the United Kingdom, alongside sustained demand from markets beyond the United States, and initiatives to tap into new export destinations may help mitigate the decline in export revenue,” the agency noted.
Moreover, the GST reduction on leather products from 18 percent to 12 percent is expected to enhance affordability and promote premiumization within the domestic market. Additionally, the income tax benefits introduced in the Union Budget, coupled with lower interest rates resulting from policy rate cuts by the RBI and stable inflation, are likely to stimulate consumption.
While the slight reduction in raw and tanned leather prices offers some relief to exporters, it remains insufficient to fully counterbalance the tariff impact, according to the agency.
Point of View
It's imperative to recognize the challenges posed by international tariffs while also acknowledging the proactive steps the Indian government is taking to support the leather industry through FTAs and GST reforms. The resilience of our exporters will be vital in navigating these turbulent waters.
NationPress
23/10/2025
Frequently Asked Questions
What is the projected revenue decline for India's leather industry?
The Indian leather industry is projected to experience a revenue decline of 10–12 percent due to US tariffs.
How will the Free Trade Agreement with the UK impact leather exporters?
The Free Trade Agreement with the UK is expected to help mitigate the revenue decline for leather exporters by opening up new markets.
What changes have been made to GST for the leather industry?
The GST rate on intermediate leather goods has been reduced from 12 percent to 5 percent, helping to lower working capital requirements.
What are the expected effects of lower interest rates and income tax benefits?
Lower interest rates and income tax benefits introduced in the Union Budget are anticipated to enhance consumption in the domestic market.
Will the decline in raw and tanned leather prices help exporters?
The decline in raw and tanned leather prices may provide some relief, but it is not expected to fully offset the impact of tariffs.
