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A Case Study of Footwear Industry in India pdf
A Case Study of Footwear Industry in India



The Indian footwear industry has developed substantial links in the global production network.
But, this industry is still dominated by firms that cater largely to the domestic market through the
artisanal production system. Specific footwear centres and sections of firms in traditional
footwear clusters have established strong relations with the export market. Still, there are only
few firms (e.g., Lotus Footwear Ltd., Apache Footwear Ltd. Etc.) that are directly involved in the
global production chain of multinational corporation (MNC) in the sports footwear category..
Apart from TATA, no large domestic corporate firm is involved in the footwear production
either for export or in the domestic market.
The marketing system of export and domestic markets can be aptly compared in the
theoretical framework of transaction cost economics (Tesfom et. al, 2003). The key elements of
this framework are asset specificity, uncertainty and frequency. In this low technology industry
entry barrier is low and asset specificity is largely related to market information. In export
market, the market research is largely undertaken by importers (wholesalers, retail chain stores,
departmental stores etc.). In the absence of organised market research by wholesalers (along with
low development of retail chain stores) direct entry into domestic market requires substantial
resources. Second, greater uncertainty exists in the domestic market in the sense of market
volatility – lack of information on evolving fashion requirement, demand in particular market
and less availability of assurance instruments (letter of credit, agents, quality inspection etc.).
Third, importers place relatively larger orders in specific frequency (seasons) whereas domestic
wholesalers order in small batches and at less regular frequency.

Footwear Industry in India in Global Context

The leather industry is one of the oldest traditional industries. It has several components like
tanning, footwear & leather products including garments. Modern leather industry began with
British governments direct encouragements. First modern tanning was established in 1857
(Kumar, 1997). The first modern footwear industry was started in 1887. However, the footwear
industry was largely based on traditional artisan mode. In the industrial policy of 1967, the
leather industry including footwear was reserved for small scale sector. In late 1970s and early
1980s, 100 per cent export-oriented footwear industries in larger scale were promoted and that
allowed larger scale industries to get established afresh. Only in the month of June in 2001, the
leather industries were de-reserved.

Studies of Footwear Industry

We have seen in the table 1 in previous section that leather footwear manufacturing largely takes
place in three states of India namely West Bengal (Eastern region), Tamil Nadu (Southern region)
and Uttar Pradesh (Northern region). These three states together account for nearly 70 per cent of
total employment is this sector. We have undertaken case study of three centres belonging to
each of these states. Another important consideration that led us to choose these centres because
Kolkata (in West Bengal) largely produces chappals in the unorganised segment, Chennai (Tamil
Nadu) produces for the high end of the export market and Agra cluster (Uttar Pradesh) produces
in all market segments that fall between Kolkata and Chennai manufacturers. In this fashion we
could capture the whole segments of footwear manufacturing in India.

Agra Cluster (Uttar Pradesh)

Agra’s shoemaking tradition began during the early days of Mughal Empire in the 16th
century. By 1885, it had become major centre for production of footwear and in that very year
first mechanised factory to produce military and civil officers’ boot of British Government was
established (Kumar, 1997).
Some exports began in 1950 to several East Asian countries but only after 1955 the
export orders from communist blocks became very important to Agra. One estimation showed
that by 1963, 13 per cent of all shoe traded in Agra was with Russia and its satellite countries
(Lynch, 1969). In early 1980s, the Soviet Union was single largest importer of footwear from
Agra, purchasing shoes worth Rs. 1,200 crores from 150 odd shoe exporters. After the fall of
Soviet Union in early 1990s, the shoe export suddenly declined to Rs. 100 crores leading to
closure of 60 per cent of shoe-exporting units of Agra. After a decade of lull, the export started
picking up and at present nearly 60 footwear exporting units’ export around Rs. 1,100 crores of
footwear largely to Europe and small amount to USA, Australia and other countries.

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