NEW DELHI — India’s leather and allied products industry is expected to see a 10–12 percent decline in revenue this fiscal year due to new U.S. tariffs, according to a report released Thursday by CRISIL Ratings. However, the ratings agency noted that the recent GST cuts and the Free Trade Agreement (FTA) with the United Kingdom could offer partial relief to exporters.
The report projected that the sector, which generated about Rs 56,000 crore in revenue in FY25 — with exports accounting for roughly 70 percent — will face pressure from reduced U.S. demand. Despite this, moderate growth in domestic consumption, supported by GST rationalization and favorable macroeconomic trends such as lower income taxes, stable inflation, and declining interest rates, may offset part of the damage.
CRISIL also warned of a 150–200 basis-point drop in operating margins and a potential weakening of credit profiles across the industry. Still, leverage levels are expected to remain stable, as companies are not pursuing significant debt-funded capital expenditures. The agency said that the reduction in GST on intermediate leather goods from 12 percent to 5 percent should ease working capital needs and limit reliance on external borrowing.
The report added that companies’ ability to reroute exports to alternative markets or through re-exports in Europe will be a key factor in mitigating losses. “The recently signed Free Trade Agreement (FTA) with the United Kingdom, sustained demand from markets apart from the U.S., and efforts to penetrate other export destinations may help contain the fall in export revenue,” the agency said.
On the domestic front, lowering the GST on finished leather products from 18 percent to 12 percent is expected to make goods more affordable, stimulate demand, and encourage premiumization. Combined with lower interest rates and tax relief announced in the Union Budget, these factors are likely to strengthen household consumption.
While a modest decline in raw and tanned leather prices will bring some cost relief, CRISIL noted it will not be sufficient to offset the broader impact of U.S. tariffs on exporters. (Source: IANS)
