NITI Aayog calls for skilling, innovation to boost leather, footwear exports

New Delhi: India needs to strengthen skilling by expanding apprenticeship-based training, adopt modern technology and create innovative designs to boost footwear exports, NITI Aayog said in its latest ‘Trade Watch Quarterly Report’.

The report, released on Monday, calls for promoting research and development (R&D) for footwear design innovation, and bridging material gaps through domestic production of soles, moulds, and synthetic uppers, which cover the top of the foot.

The country must also modernize fragmented MSME (micro, small, and medium enterprises) clusters with vertical industrial complexes and plug-and-play parks offering shared testing, compliance, logistics, and machinery access to cut costs and boost competitiveness, said the report for Q4FY25 (January-March 2025), with the latest edition focusing on leather and footwear exports.

“India’s footwear exports remain concentrated in leather products, while non-leather footwear exports are very low, despite strong global demand ($110 billion market). In 2024, the United States, Germany, France, and Italy together accounted for nearly 30% of global import demand for footwear, representing key markets where India has significant scope to expand its presence,” the report said.

“India has aligned its shift toward value-added exports (leather articles and footwear) with global trends but has not translated this into market share gains, pointing to the need for competitiveness-enhancing strategies,” it added.

To be sure, the US has announced tariffs on Indian goods, effective August 2025, including specific levies on transshipped products and imports of Russian crude and petroleum derivatives.

Most Indian exports will face a 50% tariff unless explicitly exempted, raising concerns for sectors across the board.

For the leather and footwear industry, which already struggles with low global market share and tariff disadvantages, the additional duties could further constrain competitiveness, limit market access, and slow growth.

Other export-dependent sectors, including textiles, chemicals, and engineering goods, are also expected to face margin pressures, underscoring the need for strategic diversification, value-added production, and leveraging alternative trade agreements to mitigate the impact.

“India’s merchandise export basket reflects a structural mismatch with global demand, nearly 66% ($15.8 trillion) of global imports are concentrated in products where India’s share is only 0.2%, while just 3% ($1.5 trillion) of global imports lie in products where India has high 18.2% share, showing a clear gap to address for aligning with global trade growth,” the report said.

“India’s overall exports grew at 10% CAGR (2020–24), outpacing the world import CAGR of 6%; emerging sectors like aerospace (44% CAGR, $7.4 bn) and electronics highlight India’s evolving export sophistication,” it added.

The government think-tank pointed out that India’s leather & footwear exports stood at $5.5 billion in 2024, just 1.8% of global trade worth $296.5 billion, with exports concentrated in travel goods and leather-upper footwear.

Meanwhile, India’s total trade in FY25 reached $1.73 trillion, up 6% year-on-year (y-o-y), with exports at $823 billion and imports at $908 billion, resulting in a trade deficit of about $85 billion.

While merchandise exports fell 4.3% in Q4FY25, hit by steep declines in mineral fuels (-37.8%) and organic chemicals (-14.5%), services exports surged to a record $387.5 billion, up 13.6% y-o-y, generating a quarterly surplus of $53 billion that offset merchandise contraction, NITI Aayog pointed out.

Key contributors included IT (information technology), telecom, and business services, which together account for 74% of total services exports, it said.

Electrical machinery, pharmaceuticals, and cereals drove export growth, while imports rose on the back of inorganic chemicals, nuclear reactors, and electrical machinery, it added.

To be sure, the UAE overtook Russia as India’s second-largest import source, aided by gold imports under the Comprehensive Economic Partnership Agreement (CEPA) benefits.

During FY25, trade with top markets, the USA, the UAE, the Netherlands, the UK, and China, accounts for 42% of exports, but declined 1.2% y-o-y. Exports to free-trade agreement (FTA) partners dropped sharply (-20%), led by Association of Southeast Asian Nations or Asean (-33.2%) and UAE (-10.6%), even as imports from FTA partners grew 10%, the report said.

The report also highlighted India’s leather and footwear sector, employing 4.4 million people (nearly half women) but accounting for under 2% of the global market. Tamil Nadu leads the sector, contributing 38% of output and 47% of leather exports.

Policy recommendations include tariff rationalization, cluster modernization, skilling, sustainability standards, global value chain integration, and export diversification, it added.