Agra is at the center of the Indian footwear industry. In terms of numbers, its record is undeniably impressive. On a daily basis, Agra produces a staggeringly high figure of nearly 3, 00, 000 pairs of footwear.
It accounts for over half of the total footwear production in India and for one fifth of the footwear exports.
|Daily Output||Approximately 2,50,000-3,00,000|
|Share in Domestic Output||More than 50%|
|Share in Exports||Nearly 20%|
Even though it remains the centre of footwear production in India, it operates far below its potential. India’s contribution to global exports is a little over 2% whereas its neighboring country China contributes an enormous 35% to the global exports. Countries like Vietnam, Brazil and Indonesia also contribute significantly to global footwear exports.
|Country||% share in Shoe Exports (2008)*|
What restrains India from playing a major role in the export market despite being the second largest manufacturer of shoes?
A number of interlinked reasons play an important role in India’s laggardness in export performance.
Lack of Organized Industry
Shoe industry, specifically in Agra and India in general, is highly unorganized. This is a major drawback as this makes it difficult for the industry to avail cheap industrial credit from formal sector lenders. It therefore makes investment in machinery expensive.
Through inclusion in organized sector, firms can benefit from a variety of schemes run by the government about which there is less awareness.
Most of the firms of Agra shoe industry make abundant use of cheap labor which brings down their production costs. But inadequate use of machinery and advanced tools has a negative impact on productivity. Increased mechanization can result in substantial increases in productivity and further bring down costs of production. It will also enable large quantity production. Indian firms, except a few, currently have the capability to meet the order requirements of mid-sized and small firms.
Mechanization of production involves considerable investment but it is still in the interest of the manufacturers to undertake such investment as prices realized by Indian exports is markedly higher than that of other countries.
Therefore, it is clear that use of greater proportion of machinery is beneficial to export manufacturers on the whole.
Lack of Innovation
Innovation is still largely missing among the shoe entrepreneurs. This makes their product less attractive and to some extent less competitive. By adopting innovative production techniques and fresher designs, the shoe industry carries the potential to capture a major chunk of the billion dollar shoe export market.
Misguided Government Policies
State government’s hazy policies have contributed to restriction of firm size in the industry which has affected capacity for bulk production. No excise duty till annual turnover is less than Rupees 1 crore and sales tax exemption in certain cases has provided incentive for firms to operate at low scale. Low scale production makes them incapable of availing benefit of economies of scale (lower production costs due to large quantity).
Apart from this, government has failed to address many concerns of this industry. Magnitude and multiplicity of taxes has hampered the firms from becoming a part of the organized industry. Besides, next to negligible infrastructural support (recall the congested and poorly developed corridors of Hing Ki Mandi!) has left the industry all on its own.
The need of the hour is therefore, to upgrade up to modern techniques of production, an innovative mindset and proactive government (not to miss, more than ever strong industry lobby).