DAMODARAM SANJIVAYYA NATIONAL LAW UNIVERSITY

VISAKHAPATNAM, A.P., INDIA

PROJECT TITLE:

ECONOMIC AND LEGAL ANALYSIS OF SHOES

SUBJECT:

ECONOMICS

NAME OF THE FACULTY:

ABHISHEK SINHA

NAME OF THE CANDIDATE:

VATTIKUTI DIVYA CHOWDARY

ROLL NO:

2017106

SEMESTER:

2ND SEMESTER

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 TABLE OF CONTENTS

1) ACKNOWLEDGEMENT………………………………………...……………………
2) ABSTRACT.........................................................................................................
3) SYNOPSIS……………………………………………….…………..……………...…...6
4) INTRODUCTION................................................................................................
5) HISTORICAL BACKGROUND..............................................…...……………….7
6) CONCEPTUAL FRAMEWORK…………………...............................................10
7) MICRO ASPECTS OF ECONOMICS RELATING TO FOOTWEAR
INDUSTRY.......................................................................................................
8) MACRO ASPECTS OF ECONOMICS
 PUBLIC FINANCE ASPECT
 FOREIGN EXCHANGE
 EXPORTS
9) GROWTH AND DEVELOPMENT OF FOOTWEAR INDUSTRY……….........13
10) RECOMMENDATIONS……………………………………………………..19
11) CONCLUSION……………………………………………………………………….....21
12) BIBLIOGRAPHY………………………………………………………………...….....22

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 ACKNOWLEDGEMENT

With due respect I thank my teacher Abhishek Sinha sir, who gave me this golden
opportunity to do this wonderful project on the topic ‘ECONOMIC AND LEGAL
ANALYSIS ON SHOES, which also helped me in doing a lot of research and I came to
know about a lot of things.

The project is extremely interesting to work on as it will give us the opportunity to have a
detailed insight of the economic factors in real life application. I would like to take this
opportunity to thank you for helping immensely in almost every possible way to get our
project proposal prepared. Iam extremely thankful to you as you have prepared me for
looking at the matters of life widely with open minds. This project is one of the sources of
giving us knowledge about ―Economic and legal Analysis on shoes.

Last but not the least, we express our overall gratitude to our institution, which actually
provided me the chance of having the academic requirement to prepare such a project.

Vattikuti Divya Chowdary,

2017106,

2nd semester

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 ABSTRACT

ECONOMIC AND LEGAL ANALYSIS OF SHOES

Introduction:

With the development of financial markets, the potential for new businesses and the arrival of
entrepreneurs are increasing. Economic growth has seen a booming landscape in the context
of India. India has developed its position from lower income country to lower middle income
country. This advancement has been possible with the help of some growing sectors of India.
Footwear industry is one of those booming sectors of India.

Economic growth, nowadays, largely depends on the entry of innovative business projects.
The country‘s exports of leather products and footwear have been increasing year by year,
Footwear is the basis of one of the oldest industries in India and plays a significant role in the
national economy with a good reputation worldwide. This is an agro-based by-product
industry with locally available indigenous raw materials having a potential for export
development and sustained growth over the coming years. India shoes are widely known
around the world for its high quality of fine gain, uniform fibre structure, smooth feel and
natural texture.

India being a country of artisans is known for its traditional craft of footwear making. Some
of the traditional footwear created by village craftsmen include leather chappals in Kohlapur'
embroidered Juttis in Jodhpur, Indo-Tibetan felt boots in Sikkim and vegetable fibre shoes in
Ladakh. The industrial policy 1967 reserved the leather industry including footwear only for
small scale sectors. It was only during the mid 1970s, 100% export oriented footwear units in
large scale sector were promoted. From June 2001 onwards the Government of India de-
reserved the leather sector. During the past four decades starting from the year 1981 – 1982,
the export of footwear from India had increased tremendously. Though India has a negligible
proportion of exports in world trade, it is the second largest producer of footwear next to
China. India accounts for 14% of the global annual footwear production of 14.52 billion
pairs. India manufactures around 2065million pairs of footwear every year of which 909
million pairs are made of leather, 1056 million pairs of non leather footwear and 100 million
pairs of shoe uppers. Nearly 70 percent of the labour constituting around 15 lakh people are
employed in the unorganised sector majority of them are rural artisans, cottage and household

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units, while the organised sector accounts for remaining 30 percent and employs over 5 lakh
people of the footwear industry as a result of which, China has the capacity to respond to
mass standardized order whereas the Indian footwear Industry has the capacity to serve only
medium or small scale orders. Due to reliable quality, China is able to serve the high priced
discount retail stores in United States. But India is able to serve only medium sized price
driven markets. Furthermore the Indian footwear designs are not innovative and fashionable
as compared to the Italian footwear designs. The slow growth in the international trade can
also be attributed to negligible availability of branded products. In India most of the footwear
manufacture takes place in the unorganized sector, which is another drawback to promote the
products in the international market.

This project is an attempt to know about footwear industries in large and how they are
affecting the economy and in which way law is prevailing to establish footwear industries.
The researcher has done the project with special reference to India.

Vattikuti Divya Chowdary,

2017106,

2nd Semester.

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 SYNOPSIS
Title of the project: Economic and Legal Analysis of Shoes

Introduction:
Footwear though it seems to be a pedestrian’s topic of study but it is a commodity
that leverages mass production, popularly consumed and personal expression (Michael,2007).
It is the engine of growth for the leather Industry. India is the second largest producer of
footwear next to China. India accounts for 14% of the global annual footwear production of
14.52 billion pairs. India manufactures around 1965 million pairs of footwear every year of
which 909 million pairs are made of leather and 1056 million pairs of non leather footwear.
India exports around 115 million pairs of footwear. Low cost production, abundant
availability of raw material and a huge consumption market are the basic features of the
Indian footwear market. The categories include casual, formal, semi-formal, sports shoes and
sandals. Bulk of its production is consumed internally. Therefore domestically there is a huge
market. Much of its growth is driven by the middle-class, especially in the urban market.
Despite the fact, the Indian population is becoming more eminent, still we find that the
footwear market is divided into organized and the unorganized sector. The unorganized
sector dominates the market. The overall contribution of organised retail is only 20% and is
expected to reach 25 – 30% by 2015. Urban India constitutes 70% of the overall purchase.

Footwear is the basis of one of the oldest industries in India and plays a significant
role in the national economy with a good reputation worldwide. This is an agro-based by-
product industry with locally available indigenous raw materials having a potential for export
Development and sustained growth over the coming years.
AIM: The main aim of this project is to understand the economic and legal factors related to
the footwear industry, to know about various economic factors related to footwear industry,
how are government policies on footwear industry.
SIGNIFICANCE: As India is in second place of exporting footwear in the world,
understanding the various economic factors related to footwear industry is important.
SCOPE OF THE STUDY:
The project is limited to the country of India and the information collected is taken from
2000-2018. And the subject matter is limited to only micro aspects and a few macro aspects
of economics.

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RESEARCH PROBLEM: How various rules, government policies, various economic
factors are influencing the demand, supply of footwear products and production, consumption
are influenced in footwear industry?
IDENTIFICATION OF VARIABLES:
Direct variables: direct variables include wages, transport.
Indirect variables: Indirect variables include footwear products
CONCLUSION:
Economics theory and practices are important in making business decisions and operate
business in daily basis. The theme of marginal cost, understanding the demand-supply
equilibrium, gaining the economies of scale, understanding government‘s actions, also
understanding the elasticity demand is so important in business area. A little
misunderstanding in those areas can have significantly negative impact in revenue and profit.
In the long run, the company may even go out of the business.

CHAPTERIZATION OF PROJECT:
1. Introduction.
2. History and evolution of footwear industry
3. Analysis of Micro aspects of Economics related to footwear
industry
4. Analysis of Macro aspects of economics related to footwear
industry.
5. Suggetsions
6. Recommendations
7. conclusion

Research Question:
1. How footwear industries effect Indian Economy?
2. How are taxes levied on footwear products?
3. How are government political and legal policies effecting establishment of footwear
industries?
4. What is the policy of Indian government towards footwear industries?

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Hypothesis:
This project is basically prepared on the basis of our theoretical learning of Economics theory
in our Economics course and what really is going on in the market. Throughout the project it
is tried to find out the linkages between theoretical knowledge of Economics and practical
aspects of footwear.

REVIEW OF LITERATURE:

Sources regarding the study mostly include the web sources and some of the books etc.
Review is done on a wider basis to elaborate in an accurate way. Then only the research
becomes a complete one. The data is collected from the web source.

RESEARCH METHODOLOGY:

The researcher adopted Doctrinal and Empirical method of study. This makes the collection
of accurate information regarding the research topic.

TYPE OF DATA COLLECTED:

The data collected is mostly from primary sources like survey and secondary sources like
books, journals, periodicals, newspapers, annual reports, previous research works.

LITERATURE REVIEW

ECONOMIC ANALYSIS ON THE FOOTWEAR INDUSTRY OF BANGLADESH Prepared by Md. Arif

Mahmud(ZR 48) ,Asma Ul Husna (RQ 49) ,Abu Salman Mohammad Abdullah (ZR52) ,Anika Rahman
(RQ 53) MBA – 52nd Batch from Institute of Business Administration University of Dhaka:

This thesis is mainly based on the theoretical knowledge of Economics taught in the class and
what is really going on in the market. Though the thesis deals with Bangladesh shoe
companies it is also helpful for this project as it contains the basic knowledge of what the
economic concepts taught in class and how the real economics is in the market relating to the
companies of shoe.

A brief overview of the selected nature of business, their milestones and products and
services offered by them. For relating it with the theoretical learning of Economic theory
information was gathered and analyzed data, which are mostly secondary in type. Primary

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data are also collected by personal depth interviews. Thus the thesis is helpful in
understanding the real economics. The things which are discussed in this thesis mainly
include macro and micro economic factors, demand and supply, elasticity, effect of tax
imposing on footwear industries.

A Case Study of Footwear Industry in India by SandipSarkar:

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 that are directly involved in the global production chain of
multinational corporation (MNC) in the sports footwear category. These global exports of
footwear are well explained in this thesis. Different places where footwear products are
manufactured, how employment is available there all such things were clearly explained in
this thesis which helped for the current project in getting down the valuable information.

A STUDY OF INDIA’S FOOTWEAR MARKET 2017-AN ANNUAL

REPORT BY RESEARCH AND MARKETS:

North Asia is the biggest manufacturer of footwear in the world, accounting for 70% of
the overall production in the industry. In 2014, the global footwear market was valued at
approximately USD 208 billion, and is projected to reach USD 258 billion by the year 2023.
The industry grew at a CAGR of 2.5% from in the period 2015-2023. India is globally the
second largest footwear producer after China. India's footwear production accounts for
approximately 9% of the global annual production of 22 billion pairs as compared to China's
which produces over 60%. Key production centres include Kanpur and Agra in Uttar
Pradesh, Ranipet, Vaniyambadi and Ambur in Tamil Nadu. The market currently is
dominated by men's footwear which contributes close to 58% of the total Indian footwear
retail market. In term of product type, the market is dominated by casual footwear market that
contributes approximately 67% of the total footwear retail market.

Statistics related to the footwear industries mentioned in this annual report is useful for
the current project.

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FOOTWEAR MARKET IN INDIA TO 2021 - MARKET SIZE, DEVELOPMENT,
AND FORECASTS published in July 2017 by Global Research and Data Services
The report Footwear Market in India to 2021 - Market Size, Development, and
Forecasts offers the most up-to-date industry data on the actual market situation, and future
outlook for footwear in India. The research includes historic data from 2010 to 2015 and
forecasts until 2021 which makes the report an invaluable resource for industry executives,
marketing, sales and product managers, consultants, analysts, and other people looking for
key industry data in a readily accessible document with clearly presented tables and graphs.

INDIAN FUTURES MARKET: ANALYSIS BY AGHA NURUZZAMAN

This article speaks about market, inflow-outflow, price risks, market liquidity, financial
leverage, risks involved to the footwear industries. The inflow and out flow of capital
depends on the political and economic condition of the country. It is also causes excessive
fluctuation in stock market. Political events affect the stock price due to which the trading
volume and stock return fluctuate positively or negatively as per the intensity of the events. It
explains how different factors influence the production and consumption. The economic
measures taken by the government of India have a very strong relationship with the
production of footwear. Whenever the annual budget is announced the capital market goes up
and down with the economic policies of the government. If the policies are supportive to the
companies then the capital market takes it positively by moving up and if there is any policy
that is not supportive and it tends to bring the capital market down. The article explains how
the government policies influence and effect the demand and supply of footwear. It says that
there are certain economic factors like inflation, deflation, market exchange, economic
growth, interest rates social factors like population, technological factors like internet trading,
banking system, and some other factors like laws, infrastructure, laws, economic disparities,
corruption also effect the production.

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 INRODUCTION
The global footwear market is rising expeditiously as footwear is increasingly becoming a
fashion accessory. Not only this, the increasing demands for trendy, yet comfortable footwear
among all age groups a key factor driving the global footwear market. With increasing
participation in sporting activities and changing lifestyle, there is a massive demand for
athletic shoes among non-sportspersons as well. Manufacturers are continuously focused on
expanding their product portfolio in order to gain competitive advantage in this market.

The availability of footwear through various retail channels and the gaining prominence of
online retailers are triggering the impulse buying behaviour of consumers, thereby benefitting
the footwear market. On the other hand, the availability of counterfeit products that are
developed by local manufacturers is anticipated to hinder the growth of the global footwear
market during the forecast period.

Footwear comprises men’s shoes, women’s shoes, and children’s shoes. These include all
kinds of outdoor and indoor shoes made of materials such as leather, plastic, and rubber.

The global footwear market stood at a valuation of US$215709.0 mn in 2016 and is expected
to be worth US$278860.7 mn by 2025 in terms of revenue rising at a CAGR of 3.0% between
2017 and 2025

Structure of the Industry: Agra is a major production cluster for leather footwear in
India catering to nearly half of the country’s domestic demand and more than a fifth of the
country’s export. Roughly 40% of the city’s population is directly or indirectly engaged in
this industry. Historical accounts trace the genesis of the Agra footwear industry to the rule of
Akbar during the Mughal period in India, where trade relations in Hing (a spice product)4
with Afghanistan contributed to the original supply of leather to the industry. As a result of
India’s partition in 1947, major in-migration of Pakistani Punjabi community with strong
business interests and acumen for financial management, saw the local footwear industry in
Agra being taken over by them. The erstwhile local producer communities including the
Muslims and the Jatavs got confined to production processes as the Punjabi community took
over the trade. Bata India Limited was the first company to introduce new technologies into
Agra footwear industry immediately after India’s independence in 1947. The 1950’s saw the
beginning of exports to East African countries later boosted majorly through trade initiatives
by Punjabi enterprises with connections in Delhi and Soviet Moscow in the 1980s.

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Government Policy: The leather and leather products industry including the leather
footwear industry in India has been treated largely as a single sector for policy purposes. This
sector is important for two main reasons. One, the small-scale traditional-artisanal form that
survives side-by-side with the modern industry today, which provides employment to some
of the most socially and economically marginalized sections of the Indian society,
particularly Scheduled Castes and low-income strata of the Muslim community. Two, since
pre-colonial days, this industry has generated among the most significant export earnings for
the country. These two critical factors are addressed in the government policy by focussing
on the small-scale sector development and export promotion in the leather industry. With a
view to sustain and promote small-scale artisanal, rural production in the sector, the Indian
government reserved the production of many segments of the leather and leather product
industry for the small-scale sector from 1967. The support for the sector grew in the form of
an expanding list of reserved products and subsidized financial support for small producers.
With the formal embrace of liberalization and globalization in the New Economic Policy of
early 1990s, export orientation of the leather and footwear industry overtook the traditional
emphasis on employment generation. Reservations, subsidies and such pre-liberalization
measures were seen as constraining the development of the domestic industry by a 1992
committee of the Indian government.

EXPORTS:
India is the second largest footwear producer in the world, with footwear production
accounting for approximately 9 per cent of the global annual production – 22 billion pairs as
compared to China, which produces over 60 per cent of the global production. India annually
produces 2.1 billion pairs of which 90 per cent are consumed internally while remaining are
exported primarily to European nations which include United Kingdom, Germany, USA,
Italy and France, as per market analysts.

Footwear exports from India have grown at a CAGR of 20 per cent in Indian Rupee terms
during the last five year backed by growing demand from European nations and increasing
focus of main importing countries to shift sourcing from China to other low cost producing
countries. India is the third largest footwear consuming country in the world after China and
USA, but with very little separating the three, India is very soon expected to be the second
largest consumer as well.

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In absolute terms, footwear exports from India have risen from Rs. 71.5 billion in FY10 to
Rs. 180.0 billion in FY15. The growth in Indian fashion and lifestyle market has given an
impetus to the footwear industry as well. From a basic need-based industry, it has become an
evolving fashion and style category.

DECLINING FOOTWEAR EXPORTS IN INDIA:

The World Footwear Yearbook confirmed that in 2015 India was the second largest footwear
producer (9.6% share of total with 2 200 million pairs) and the 3rd consumer (2 196 million
pairs with a 10.6% share of total). The Indian industry is very focused on the internal market;
nonetheless, in 2015 the country was the 7th largest footwear exporter with 206 million pairs
traded and a share of 1.4% of global footwear exports.

The reasons for the decline in the footwear exports are discussed briefly below

CHALLENGES AHEAD
The footwear and leather goods subsector currently is facing many challenges. The main
challenges are given as:

 The use of old and obsolete machines;

 The lack of design expertise and supporting technologies to produce fashionable
products;
 Skills shortages;
 Poor supply of quality raw hides;
 The high costs of finance;
 High costs of production inputs;
 High import tariffs on inputs (25 percent on finished leather and 15 - 25 percent on
midsoles and outsoles);
 High volatility of the local currency against major foreign currencies; and
 High volume of second hand shoe imports due to the lack of import restrictions and
tariffs equal to that of raw materials for shoe manufacturing (25 percent).

Other challenges include the global economic downturn of 2008-2009 that made the entire
production sector decline. During the economic downturn, market access by exporters of wet
blue, finished leather and leather goods declined significantly due to low demand for these
products on the international market.

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 FOOTWEAR INDUSTRY IN INDIA – HISTORICAL BACKGROUND

EVOLUTION:
The history of the use of Footwear by human kind can be traced back to the ice age
about 5 million years ago. Due to unkind weather conditions the need for footwear started
growing. Other evidences show that footwear came to use at the end of the Palaeolithic
Period, at about the same time the early humans learned the art of leather tanning. Earlier
footwear was made of wrappings of dried grasses and only later on the art making footwear
from pieces of leather was developed. Until the mid-nineteenth century shoes were made as
straights i.e., there was no distinction made between the right and left shoes. The left and
right footwear were identical and hence could be worn on either foot. Only prolonged usage
shaped them into right and left boots. The right and left shoes were invented by a fashionable
boot maker, William Young from Philadelphia in 1800. The first crafted footwear is the
Sandals, which are known to be the successor’s to these wrappings. In India these Sandals
were called as Padukas, which were mainly worn by the Saints.

Over centuries many varieties of footwear were made in the Himalayan region in
order to protect the feet from cold weather. Footwear was made of leather, wool or remains of
the plants. Since most part of India is warm, footwear was not a necessity and therefore
Indians were barefooted for many years. Innumerable references to foot worship in Indian
culture convey the impression that the foot is regarded as an important part of the human
body. Touching the feet of elders was considered as the height of good manners. It was
considered as a civilized behaviour. Until half a century ago, India was described as a
barefoot country. They were characterized by such toughness of foot that they can travel for
long distances without any discomfort. It seems likely that the cultural adjustments lead to the
adoption of footwear. Furthermore, the ascetic Hindu, Buddhist and Jain sects were not
generally permitted the worldly luxury of footwear. Therefore footwear was considered as a
luxury until half a century ago. But even then India was known for its traditional craft of
footwear making

The Indian Footwear sector is a promising one with tremendous opportunity for growth both
in the international and domestic market. With low production cost, abundant supply of raw
material, evolving retail system, buying patterns and huge consumption market, this sector is
posed to grow to great heights. But this market is highly fragmented. The unorganized sector
dominates the industry posing a threat to the organised players. The Indian consumers have

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become more discerning these days. The double income stance, increased disposable income
among the urban middle class, brand and fashion consciousness due to globalisation have all
led to changing lifestyle of the Indian consumers.

Footwear refers to garments worn on the feet, which originally serves to purpose of
protection against adversities of the environment, usually regarding ground textures and
temperature. Footwear in the manner of shoes therefore primarily serves the purpose to ease
the locomotion and prevent injuries.

Cultures have different customs regarding footwear. These include not using any in some
situations, usually bearing a symbolic meaning. This can however also be imposed on
specific individuals to place them at a practical disadvantage against shod people, if they are
excluded from having footwear available or are prohibited from using any. This usually takes
place in situations of captivity, such as imprisonment or slavery, where the groups are among
other things distinctly divided by whether or whether not footwear is being worn. In these
cases the use of footwear categorically indicates the exercise of power as against being
devoid of footwear, evidently indicating inferiority.

MANUFACTURING HUB:
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.
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.

India being a country of artisans is known for its traditional craft of footwear making. Some
of the traditional footwear created by village craftsmen include leather chappals in Kohlapur'
embroidered Juttis in Jodhpur, Indo-Tibetan felt boots in Sikkim and vegetable fibre shoes in
Ladakh. The industrial policy 1967 reserved the leather industry including footwear only for
small scale sectors. It was only during the mid 1970s, 100% export oriented footwear units in
large scale sector were promoted. From June 2001 onwards the Government of India de-
reserved the leather sector.

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 MCRO ASPECTS OF ECONOMICS RELATING TO FOOTWEAR INDUSTRY IN INDIA

DEMAND AND SUPPLY:

FACTORS EFFECTING DEMAND

 Seasonality of demand: The demand for shoes increases during winter. In summer the
demand for sandal rises and in rainy season demand for plastic made sandal/ shoes
rises.
 Price: if average price can kept low, then quantity demanded increases.
 Income: the demand for shoes increases when average income of people increases.
 Festivals: during the major festival-- Eid, Pohela Baoshakh, Durga Puja-- of
Bangladesh the demand for shoe rises.
 Global Economy: demand for Bata shoes is directly related to the global economy. It
is quite natural that a healthy global economy will produce higher demand for shoes.
 Shocks: Natural disaster and other shocks that impact the economic system affect the
demand adversely.
 Quality: when the quality of any specific design falls, then demand of that specific
design also falls.
 Population: As the population of the world increases, the demand for shoes is also
escalated.
 Price of substitutes and complementary goods: when buyers get same quality product
at cheaper price from other brands or source, then the demand of Bata shoes falls.

FACTORS EFFECTING SUPPLY:

There are several factors that affect the supply of the shoes which helped the company to earn
the desired revenue per year. Some of the factors have been described in the following
section.

 SEASONS: During the rainy season the supply decreases due to hindrance in
transportation.
 FESTIVALS: As demand increases in festivals, hence supply also increases in
festivals.
 COST: When cost increases, then shoes supply decreases.

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  POLITICAL UNREST: During hartal, oborodh and other violent political activities
the supply of shoes decreases.
 PRICE OF SUBSTITUTES: When demand for sandal increases then more sandals
are made as a result less shoes are supplied. On the other hand when demand for
shoes increases then more shoes are supplied and less sandal are made. This happens
as the production capacity is limited.
 Production capacity: Supply of shoes is directly related to production capacity. More
the production, more the supply.
 Other input prices: Prices of other industry inputs such as labour, logistics etc. Also
act as determinant of supply function of shoes.
 Competitor offer: Competitor activities and offers affect supply of Bata shoes.
 Government policies: when tax increases on shoes then supply decreases.
 No. of shops: With the increase in no of shop supply usually increases.
 Technology: technological advancement in the sector will increase the supply of
shoes.

MARKET SIZE, GROWTH & SEGMENTATION

As per the India Retail Report, India’s total retail market is worth Rs 3,893,425 crore,
growing at 18 per cent and is expected to cross Rs 6,156,333 crore by 2017. Modern retail is
estimated at 42 per cent of this total market and is expected to grow by 21-23 per cent Y-o-Y.
Retail expansion grew at an average of 16-18 per cent in terms of number of outlets and retail
space with same outlet growth being around 25 per cent.

The footwear market in India, like its international counterpart, has always been broadly
classified into three segments, Men’s, Women’s and Kids. Men’s market is growing at a
CAGR of 10 per cent. At present, men’s market contributes around 60 per cent of sales in the
footwear segment as against women’s share of 30 per cent. The women’s
segment, however, is growing at a much faster CAGR of 20 per cent.

Based on the usage, the market can be divided into two sub categories:

 Regular (consisting of daily and sports footwear, material can be leather/non-

leather)

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  Occasional (consisting of premium and luxury, material can be leather/non-
leather)
From price point, the footwear industry in India can be divided into five parts:

 Mass (Rs 150-700)

 Mid/Economy (Rs 700-1000)
 Active Sports (Rs 1000-3000)
 Premium (Rs 3000-5000)
 Luxury (Above Rs 10,000) segment
The footwear market of the country is shared between organised and unorganised segment.
The organised segment caters to about 1/3rd of the market while the remaining market is
fetched by unorganised players.

The unorganised segment gains prominence in the Indian context due to its price-competitive
products, which are more suitable and attractive to the price conscious Indian consumer. But
with increased household income, shifting consumer behaviour from saving to spending,
increasing brand consciousness amongst Indian consumers, influx of large number of global
brands and penetration in tier – II and III cities by footwear companies, the organised retail in
footwear market is rapidly evolving and expected to grow at a higher rate in the future.

The rural market of India is still largely untapped for footwear manufacturers. Companies are
re-positioning themselves and launching specific products and price ranges to expand their
presence and increase their consumer base in rural areas.

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 ANALYSIS OF MACRO ASPECTS OF ECONOMICS

EXPORTS:
Among the leather and leather products exported from India, leather footwear occupies the
prominent position at 42.83% of the total exports. It must also be noted that leather footwear
has been and is expected to be the dominating export of the leather industry. Therefore, an
inevitable overlap in trends and features of the leather industry and the footwear industry is
witnessed. In 2015, India was the second largest producer of footwear after China. India
produced 2,200 million pairs of shoes equivalent to 9.6% of the total world production.
However, China is by far the leader in this segment producing 13,581 million pairs in 2015,
that is, 59.1% of the total world production. But India did considerably better than Vietnam,
Indonesia and Brazil which rank 3, 4 and 5, respectively, with shares in global production
hovering in the range of 3 to 5% (APICCAPS 2016: 4, 21). India is also the third largest
consumer of footwear after China and the US, with a market for 2,196 million pairs
amounting to 10.6% of the total world consumption of footwear in 2015. As an exporter of
footwear though, India ranks relatively low at number 7, exporting 206 million pairs or 1.4%
of the total world export in footwear in 2015. These numbers reflect that India has yet some
distance to cover for better integration with the global supply chains when it comes to its
footwear industry, which currently is mainly producing for domestic consumption. In value
terms, Indian exports rank further lower in the world rankings at number 11 with a 2% share
in the global export market. India has the same low ranking at number 11 when it comes to
average export price of footwear at USD 11.92. In fact, among the top 5 Asian exporting
countries, India ranked last in both quantity and value terms. India is not to be seen among
the top ten exporters of waterproof footwear in the world in 2015. A similar situation exists
when it comes to rubber and plastic footwear. Leather footwear represents India’s
competitive strength in exports where it was ranked ninth among the top world exporters of
leather footwear in 2015. In value terms, India’s export of leather footwear is fairly
comparable to Indonesia, Spain and Belgium which are ranked higher in this list. In quantity
terms, at 115 million pairs in 2015, India produced far more footwear than most countries
that lead it in the leather footwear export rankings. Given this fact, India still ranking at
number 9 in value terms reflects the considerably lower quality of its production. Its average
export price at USD 16.72 compared to the global average export price of 25.16 USD for
leather footwear is reflective of the Indian industry’s incapacity to add considerable value to
its leather footwear and therefore capture a higher place in the global supply chain. India is

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again missing from the top ten exporters’ lists when it comes to textile and other types of
footwear export. It is clear that India’s limited strength in the global export market for
footwear lies in leather footwear. In fact, leather footwear accounted for as much as 56% of
the total exports from India in 2015, with rubber and plastic footwear occupying the second
place at 29%. However, despite the predominance of leather footwear in Indian exports, India
requires a high level of up gradation of its product quality in the world market. India is also a
major importer of footwear showing a gradual increase in its imports in value terms between
2009 and 2014. In fact, India’s imports at 203 million pairs was comparable to the quantity it
exports at 207 million pairs in 2015- the rate of growth has been more than 50% in the years
2013 and 2014. 67% of India’s imports in 2015 were rubber and plastic footwear followed by
leather and other type of footwear as the second and third leading categories of imported
products. Indian market consumed almost as many pairs of footwear at 2,196 million pairs as
its industry produced (2,200 million pairs) in 2015. However, export growth rate between
2004 and 2014 has shown a much higher increase compared to a rather slow but steady
increase in the rate of import growth (Ibid.). The UK and the US were the two largest export
trading partners for India in 2015. Germany, UAE and France are the 3 other major importers
of Indian footwear products according to 2015 data. The US, UK, UAE, Somalia and
Germany have shown remarkable increase in imports from India between 2010 and 2015.
China, Vietnam, Nepal, Indonesia and Bangladesh were the top countries from which India
imported footwear products, in 2015. Since 2010, the rate of import growth from these
countries to India has been remarkably high (APICCAPS 2016: 70). Indian export grew by
200% over the last decade but in 2015 they declined somewhat. Indian imports have also
been growing steadily and in 2015 exceeded 400 million USD for the first time. Bata India
Limited, Relaxo Footwear Limited, Puma Sports India Private Ltd, Adidas India Marketing
Private Limited and Ssipl. Retail Limited are the largest players in the Indian footwear
market with their turnovers ranging from 112.6 million USD to 409.2 million USD in 2015.

GOVERNMENT REGULATION
Footwear below Rs 500 will be taxed at 5 per cent under the Goods and Services Tax, while
the rest would be 18% levy. Currently, footwear priced from Rs 500-1,000 attracts 6 per cent
excise duty. Besides, states also levy VAT. The dual tax slab rates will have a detrimental
impact on the overall sector as footwear priced between Rs500 and Rs1000 will be taxed
more. CFLA has made multiple representations to the government to reconsider the 5% and

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18% rates and bring them on par with those applicable to the apparel industry, which is taxed
at5%and12%.

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 GROWING FOOTWEAR INDUSTRY- A BRIEF SUMMARY

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. With development of time
and technology, the growth of footwear industry can be understood well by the establishment
of Major players in footwear industry. The brief description of major footwear companies in
India are mentioned below:

IMPORTANT COMPANIES OF FOOTWEAR PRODUCTION:

There is more than 1 million people engaged in the Indian footwear industry. Leather
footwear is by far the most important product for the Indian footwear industry, both in terms
of production and export. The major importers are the UK and the US as well as Germany,
France and Italy.

The Indian consumer market is younger when compared to the markets in the developed
nations, which comprises more of older consumers presently and therefore the retail markets
have become more saturated. Therefore many foreign brands have already started
establishing themselves in India namely, Aldo, Bally, Clarks, Ecco, Florshiem, Ferragammo,
Hush Puppies, Lee cooper, Lloyd, Marks & Spencer, Nike, Nine West, New Balance,
Reebok, Rockport, Stacy Adams, Tod’s, Geox and Louis Vuitton. Similarly domestic brands
are also moving beyond national boundaries namely, Red Tape, Bata, Liberty, Khadims,
Lakhani, Metro and Action shoes.

ADIDAS:
Adidas ltd is a German sports apparel manufacturer and part of the Adidas group,which
consist of Reebok sportswear company, Taylor Made-Adidas golf company, andRockport.
Adidas is the largest sportswear manufacturer in Europe and the second largestsportswear

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manufacturer in the world. Company’s revenue for 2006 was listed at about US $13.625
billion and the 2007 figure was listed about $ 15.6 billion. It has more than 170subsidiaries
guarantee marketplace presence for Adidas products around the world.
Liberty:
Liberty shoes ltd. is a leading leather shoes brand and is engaged in the
manufacturing,supplying and exporting of the footwear’s. It is the only Indian leather shoe
brand that occupiesfifth ranking among the top shoes manufacturing companies in the world.
Reebok:
Reebok specializes in the design, marketing and distribution of sports and fitness products
including footwear, apparel and accessories, as well as footwear and apparel for non-athletic
use. The company has three main product categories: Rbk, Performance, and Classic.Each of
these product categories features product offerings for both men and women that aredesigned
for specific consumer groups. Reebok has operations in the UK, Europe and in variousand in
various Asian countries. It is headquartered in canton, Massachusetts. The acquisition
of Reebok by Adidas-Salomon was completed in January 2006.
Bata:
Bata industries is a specialized division of the world’s largest shoe manufacturer:
the Batashoe Organization (BSO). Bata industries has operations and production facilities in
most of the countries worldwide. Bata India Limited is the largest footwear retailer in
India. Bata India is a manufacturer of footwear. Types of footwear offered by the company
include rubber, canvas, leather and plastic footwear. The company also markets apparel under
the brand names of North Star, Power and Ambassador. Bata India has five manufacturing
plants and acquires its leather from two tanneries in Mokamehghat (Bihar) and Batanagar. It
is headquartered in West Bengal, India.
Relaxo:
Relaxo entered into footwear industry in 1976. It started off with the manufacturing
of Hawaii slippers and subsequently diversified into manufacturing casuals, joggers, school
andleather shoes. Relaxo has the capacity to manufacture over 100 million pairs, per annum.
It hasthe customer base of around 100 million.

But with the establishment of footwear industry there had been different problems arisen
because of these companies. Some of the key issues are dealt in this project.

KEY ISSUES:
Employment of children in the footwear industry:

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Children are employed in themanufacturing of shoes, particularly in the Agra area of U.P.
where approximately 25000children are estimated to be involved in the process of shoe
making for domestic as well asinternational markets. These children are between the age
group of 10 – 15 mainly employed for the assembling shoes process. Furthermore these
children are exposed to physical factors likeleather dust, benzene and p-tert butyl phenol,
poor illumination. Thus these children suffer from problems like respiratory problems, skin
infections etc.
Occupational Health Hazards in Footwear Industry:Occupational Cancer:
Studies have proved that employment in the shoe production and repair plants is associated
with enhanced risk for cancer. The exposure to leather dust which containsseveral harmful
compounds can lead to lung cancer to both male and female. It also causesaplastic anemia,
leukemia and other health problems.

Neurotoxicity:
The organic solvents present in the adhesives and glues are mostly neurotoxic,causing
shoemaker’s paralysis that is more or less form of paralysis.
Injuries:
The children employed in the footwear industry usually carry out the sewing
processmanually. During this they are susceptible to injuries from sharp special needles.
Exposure to adverse physical factors:
As discussed above about 80% of the child labours work on contract basis, thus they do some
extra work at their home in order to generate some moneywhere they work in poor
illumination which results in eye-strain, headache and communicablediseases
Skin Ailments:
Footwear workers develop dermatitis due to exposure to chemical present in theadditives
used in processing of leather and rubber footwear which results in occupational vitilgo.

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 RECOMMENDATIONS

•Prohibition of employment of Children in Footwear Industry

•Provide hygienic environment for workers in the industry
•Indian Footwear companies should opt for modern technologies
•Companies like Bata, Relaxo, Liberty should focus on Upper class customers
also.

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 CONCLUSION
Economics theory and practices are important in making business decisions and operate
business in daily basis. The theme of marginal cost, understanding the demand-supply
equilibrium, gaining the economies of scale, understanding government‘s actions, also
understanding the elasticity demand is so important in business area. A little
misunderstanding in those areas can have significantly negative impact in revenue and profit.
In the long run, the company may even go out of the business.

India though a barefooted country until half century ago is known for its traditional craft of
footwear making. Some of the traditional footwear created by village craftsmen includes
leather chappals in Kolhapur embroidered Juttis in Jodhpur, Indo-Tibetan felt boots in Sikkim
and vegetable fibre shoes in Ladakh. It was only in the year 2001 the Government of India
de-reserved the leather sector. The Indian Footwear sector is a promising one with
tremendous opportunity for growth both in the international and domestic market. With low
production cost, abundant supply of raw material, evolving retail system, buying patterns and
huge consumption market, this sector is poised to grow to great heights.

India is often referred to as the sleeping giant in footwear terms. With changing lifestyles and
increasing affluence, domestic demand for footwear is projected to grow at a faster rate than
has been seen. India is witnessing buyer’s preference towards branded stuff. More
international players will also enter the market and they will offer a wide variety to the
consumer. All these are indications that Indian footwear industry might exhaust its full
potential and grow exponentially. Therefore it can be observed that the footwear market is a
market with tremendous opportunities but still an untapped sector. Applying new
segmentation and positioning strategies can help the manufacturers and retailers to
understand the fine nuances of the consumers not only domestically but also in the
international market.

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 REFERENCES
1.You, Jong II (1995), ‘Small Firms in Economic Theory’, Cambridge Journal of Economics, vol. 19, pp.
441-462.

2.Kumar, Subas C. (1997), ‘Indian Leather Industry: Growth, Productivity and Export Performance’,
APH Publication, New Delhi.

3.Tesfor, G., C. Lutz, and P. Ghauri (2003), ‘Comparing Export Marketing Channels: Developed versus
Developing Countries’, International Marketing Review, 21:4/5, pp. 409-22.

4.Rutherglen, George A., International Shoe and the Legacy of Legal Realism. Supreme Court
Review, 2001. Available at SSRN: https://ssrn.com/abstract=291860

5.https://www.worldfootwear.com/news/declining-footwear-exports-in-india/2147.html

6.World footwear year book 2017.

7.http://www.indiaretailing.com/2017/03/22/fashion/stepping-into-a-bigger-better-future-a-report-
on-indias-footwear-market/

8.Walk a mile in their shoes: workers rights violation in Indian footwear and leather industry by
vaibhav raj, shashi kanth prasad, anton pieper.

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