Leather industry’s revenue likely to be hit by US tariffs
GST 2.0 and FTA with UK may provide some relief, says report
image for illustrative purpose
New Delhi: India’s leather and allied products industry is projected to experience a 10–12 per cent revenue decline in current fiscal following the United States' tariffs, a report said on Thursday, adding that Free Trade Agreement (FTA) with the UK and GST cuts will provide some relief to leather exporters.
The revenue drop would be despite a moderate improvement in domestic demand following the rationalisation of GST besides other favourable macro-economic factors such as lower income taxes, benign inflation, and low interest rates, according to the report from ratings agency CRISIL Ratings. Th agency also indicated a potential 150–200 basis-point impact on operating margins and a deterioration in credit profiles.
The leather and allied products industry is estimated to have logged a revenue of Rs56,000 crore in FY25 and exports accounted for 70 per cent of the revenue.
The agency forecasted that leverage levels of companies are expected to remain stable. The reduction in GST on intermediate leather goods to 5 per cent from 12 per cent should provide some respite by reducing both working capital requirement and reliance on external debt.
The absence of any significant debt-funded capital expenditure plans will also keep leverage in check, the statement said.
The agency said that the capacity to reroute exports to alternative markets andre-exports through Europe can impact the earnings of the companies. “The recently signed Free Trade Agreement (FTA) with the United Kingdom, sustained demand from markets apart from the US, and effortsto penetrate other export destinations may help contain the fall in export revenue,” the statement said.
