Modi government plans $1B relief package for footwear industry
What's the story
The Indian government is said to be working on a $1 billion relief package for its beleaguered footwear industry. The move comes as the sector struggles under the weight of a 50% tariff imposed by the United States on Indian exports. The proposed financial aid aims to strengthen the entire production chain, from raw materials and components to finished products.
Strategy
Comprehensive package to boost footwear manufacturing
The proposed package is said to be more comprehensive than a previous production-linked incentive scheme for footwear, which was scrapped after a government policy revamp. The new strategy focuses on the entire value chain and offers incentives to investors in this labor-intensive industry. While the plan hasn't been officially finalized yet, discussions are at an advanced stage and an announcement is expected soon.
Market standing
India's position in global footwear market
India is the second-largest producer of footwear in the world. It was a major player in the leather footwear segment until global changes shifted focus toward sports shoes and athleisure. China took over as a leader, with Vietnam joining the race with mega plants. Despite these challenges, domestic firms have become contract manufacturers for foreign companies, especially from Taiwan.
Investment impact
US tariffs disrupt investment plans
The US tariffs have disrupted investment plans in the Indian footwear sector. Domestic manufacturers have also complained about a lack of capacity to produce key inputs, mostly imported from China. High duties on raw materials for soles and other shoe components make local production uncompetitive, forcing manufacturers to rely on imports. Industry executives note that the government has taken a similar approach in the electronics sector with comprehensive packages covering components.
Growth
Government's aim to boost domestic consumption and exports
The Centre's move also aims to boost domestic consumption and exports of footwear, making Indian companies stronger players in the global value chain. This strategy aligns with India's aggressive free trade agreement efforts, with the European Union and UK likely to join soon. These markets are tipped to offer duty concessions for Indian goods, helping absorb any extra production capacity in the coming months.