chapter 3 the leather industry in india and tamil nadu...

Leather IndusllY in India and Tamil Nadll-Macro Level Trends

Chapter 3

The Leather Industry in India and Tamil Nadu

Recent Trends

Introduction

This chapter focuses on two aspects of the Leather Industry in India. Export trends

and macro level trends in terms of growth of employment, labour productivity, real

wage rate, money wage rate and other variables are analysed using Annual Survey of

Industries (ASI) data for India and Tamil Nadu. This chapter has six seetions- Section

I analyses the export trends in Indian leather industry. The study used ASI data for

analysing growth of employment money wage rate, labour productivity and certain

other variables. Section 2 focuses on the data source and methodology used for

analysing ASI data, Section 3 presents an aggregate analysis (based on two-digit

classification) of the leather industry and compound growth rates. Section 4, explains

the disaggregate analysis based on the three-digit classification of the leather industry

and offers a comparative analysis within the c1assitieation while the leather industry

in Tamil Nadu is described in Section 5, Section 6 presents a conclusion.

Section 1

3.1 Export Trends in the Leather Industry in India

The Leather industry occupies a place of prominence in the Indian economy in view

of its massive potential for employment generation and exports. The exports of leather

and leather products gained momentum during the past decades. Before analyzing the

growth of exports, it is important to understand the contributory factors responsible

63

Leather Industry in India and Tamil Nadu-Macro Level Trend,

for the growth of the leather industry in India. For instance, a strong raw material base

-India ranks first among major livestock holding countries, with 19 percent ofbovinc.

20 percent of goat and 4 percent of sheep/Iamb population and accounts for about 10

percent of global supplies of raw skins and hides (Planning Commission 2002). The

other factors are low cost labour, progressive Government policies concerning exports

and imports and availability of trained human resources.

Export of Leather and Leather Products in the 1970s

During the 1970s, there was great demand for readymade finished garments and

garment leather in the global market, particularly in the East European countries

(Seetharamiah 1972, cited in Das and Mukhopadhyay 2001). India was an exporter of

raw hides and skins during that period. It was against this background that Ministry of

Foreign Trade setup a committee headed by Seetharamiah. The Committee suggested

measures to switch from cxport of raw and semi processed hides and skins to finished

leather and leather goods. The objective of the policy change was to produce high

quality finished leather and leather manufactures so that India could export a greater

proportion of llnished leather and leather manufactures compared to semi-processed

hides and skins to realize better foreign exchange earnings in the future.

The year 1973 was a milestone in the history of the Leather Industry in India. The

Government of India adopted the recommendations suggestcd by the Seetharamiah

Committee and banned the export of raw hides and skins, and imposed fiscal and

physical restrictions on the export of semi processed hides and skins. The policy

changes during the 19705 had an impact on the import and export of the leather

industry. This is evident from thc Table 3.1.

Table 3.1 shows that in absolute terms, the export of semi-finished leather declined

from US $ 205.3 million in 1972-1973 to US $ 130 million in 1979-1980. During thc

same period, the export of finished leather increased from US $ 23.1 million to US $

394.9 million. Likewise, the export of leather products also shows an increasing trend

from US $ 19.2 million to US $ 135.4 million. The Graph 3.1 below explains that the

switch in the policy from export of raw and semi-finished hides and skins to fInished

leather and leather manufactures are reflected in the composition of the Indian leather

export basket during the 19705.

64

Leather Industry in India and Tamil Nadll-A1acro Level Trend,

Table: 3.1 Export of Leather and Leather Products (1972-73 to 1979-80) (Million US $

Year Semi-finished Finished Leather Total Leather Total Leather Products

1972-73 205.3 (8 7.9) 23.1 (9.3) 19.2 (77) 247.6 (100) 1973-74 182.3 (81.6) 20.8 (9.3) 20.2(9.1) 223.3 (100) 1974-75 121.3 (64.5) 36.5 (19.4) 30.2 (16.1) 187.9 (100) 1975-76 149.9 (612) 61.2 (25.0) 34.0 (139) 245.2 (100) 1976-77 157.2 (47.4) 120.4 (36.3) 53.9 (16.3) 331.4 (100) 1977-78 130.1 (39.5) 131.5 (40.0) 674 (20.5) 328.8 (100) 1978-79 136.0 (29.5) 236.2 (51.2) 89.0 (I93) 461.2 (100) 1979-80 130.0 (I 9. 7) 394.9 (59.8) 135.4 (205) 660.4 (100)

Source: Das and Mukhopadhyay (2001), 'The Indian Leather Industry-A Perspective', Margin, 33(4): 59-84.

Note: Figures in parentheses shows the percentage.

Graph 3.1 Export of Leather and Leather Products in the 19705

700

SOD

$ SOD ., a e 400 o it ~ 300 w

~ =- 200

100

o

_.

~

-~ .:-~

72-73 73-74 74-75 75-76 76-77

Yea,

- --

/ /

-year

/ -Semi Finished Lea1htr

/' , - Finished Leather

,

/::" //'. - T otallea1her

Product>

- T otal Lea1her and - Lea1her ProdLJct

)).78 78·79 79·80

Thus the policy changes during the 1970s helped the Leather Industry in India to

change from export of semi-finished hides and skins to finished leather and leather

products and helped to eam better foreign exchange.

Export of Leather and Leather Products in the 19805

During thel980s the Ministry of Commerce appointed a Task Force Committee on the

expon of leather and leather products under the chairmanship of Mr. P.K.Kaul. The

Task Force recommended liberal import of capital goods and inputs (chemicals and

wet blue hides and skins) at a concessional duty for the increased export production of

value added products manufactured from conserved indigenous raw materials. Thus

65

Lealher Induslry in India and Tamil Nadu-Macro Level Trends

efforts were made to maintain the growth of leather exports. However the first three

years recorded a declining trend in the exports, which is reflected in Table 3.2.

Table: 3.2 Export of Leather and Leather Products (1980-81 to 1990-91) (Million US $)

Year Scmi- Finished Fooh,"'car Footwear Leather Leather Total finished leather components garments goods leather

1980-81 63.6 286.7 42.7 57.0 6.5 48.8 505.4 1981-82 59.4 252.4 33.5 86.1 8.1 45.4 484.9 1987-83 56.3 206.8 20.3 82.0 7.7 40.1 413.2 1983-84 51.6 189.2 22.7 109.8 6.5 41.9 421.7 1984-85 41.3 259.5 22.5 111.7 8.0 48.0 491.0 1985-86 40.1 235.5 27.0 155.6 13.7 69.6 541.5 1986-87 41.1 313.7 62.9 188.4 48.7 73.6 728.4 1987-88 56.0 374.8 98.7 249.8 81.5 99.3 960.1 1988-89 31.1 448.7 89.9 293.9 114.7 132.3 1110.6 1989-90 12.7 416.6 103.0 311.3 199.9 175.9 1219.3 1990-91 2.1 400.6 150.0 373.3 298.6 198.6 1423.3

Source: Das and Mukhopadhyay (200 I), '171e Indian Leather !ndllslry-A Per.lpeeli"e', Margin. 33(4): 59-84.

The total value of exports declined continuously from US $ 505.4 million in 1980-81

to US $ 413 million in 1982-83. The export value of each item of the leather export

basket showed a declining trend in the first three years except for footwear

components and leather garments. nas and Mukhopadhyay (200 I) explained that the

decline in the global demand for leather and leather goods and widespread

fluctuations in the foreign currency markets in the middle of the financial year 1981-

82 could be the possible reason for declining exports. From 1983-84 onwards the total

export value continuously increased from US $ 421.7 million to US $ 1423.3 million

in 1990-91. Because of the long prevailing restriction on its export, the export value

of semi finished leather reduced from US $ 63.6 million in 1980-81 to US $ 2.1

million in 1990-91. During the same period the export value of all the leather

products increased drastically.

Export of Leather and Leather Products in the 1990s

The 1990s shows fluctuating trends in the Indian leather industry. On J lily 4, 1991 the

Government of India announced liberalized industrial and trade policies with far

reaching implications. In spite of a more export oriented and liberalized economic

policy of 1991. the value of leather exports declined during 1991-92 and 1992-93.

66

Leather industl)' in India and Tamil Nadu-Macro Level Trend,

The total value of leather exports declined from US $ 1423.3 million in 1990-91 to

US $ 1274.3 million in 1991-92 and further to US $ 1204.8 million in 1992-93.

Nearly all the items in the leather export basket experienced a decline. The Indian

economy took some time to adjust to its new economic environment. From 1993-94

onwards, the total expon value of leather and leather products started increasing. It

started increasing from US $ 1333.6 million in 1993-94 to US $ 1763.5 million in

1995-96. After 1995-96, the export value started declining and a similar trend

continued till 1999-2000. From 2000-2001 onwards, the value of exports increased

from US $ 1853.2 million to US $ 2229.6 in 2004-2005.

Table: 3.3 Export of Leather and Leather Products (1991-92 to 2004-2005) (Million US $)

Year Finished Leather Footwear Leather Leather Total Leather Footwear components Garments Goods

1991-92 296.7 J 75.9 271.2 301.1 229.3 1274.3 1992-93 266.9 170.7 214.6 316.5 236.1 1204.8 1993-94 270.3 204.3 253.4 342.3 229.2 1333.6 1994-95 382.6 302.2 247.3 386.8 291.8 1652.6 1995-96 370.3 329.7 253.7 415.2 353.7 1763.5 1996-97 301.1 337.5 222.7 424.4 320.2 1605.9 J 997-98 287.5 273.0 239.7 412.8 259.8 1472.8 1998-99 268.4 324.7 241.1 382.0 411.1 1627.3 1999-00 240.1 378.0 241.0 426.0 377.0 1662.1 2000-01 382.1 382.0 223.0 425.0 441.1 1853.2 2001-02 457.4 394.2 233.3 378.6 406.52 1870.0 2002-03 508.83 423.30 175.07 272.08 425.4 1804.7 2003-04 555.71 553.04 161.27 301.08 539.21 2110.3 2004-05 577.00 601.73 163.67 3 I 8.73 568.46 2229.6 Notes: I. Data for 1991-1997 is cited from Das and Mukhopadhyay (2001), 'The indian

Leather industry-A Perspective', Margin, 33(4): 59-84. 2. The data for the years 1998-99, 1999-00,2000-01 were cited from CMI E (2002),

'Foreign Trade and Balance of Payment' , October: 14-15. 3. The data for the year 2001- 2002 is cited from Planning Commission (2002),

'Tenth Five Year Plan (2002-2007)" 2: 690-691. 4. The data for the year 2002-2003,2003-2004 and 2004-2005 is cited from

http://www .Ieatherindia.org/product wise.asp.

67

Leather Industl)' in India and Tamil Nadu-A1ac/'O Level Trends

Graph 3.2 Export of Leather and Leather Goods from 1972-73 to 2004-05 ,-------------------------------

Export of Leather and leather Goods from

1972·73 to 2004-05

2500~---------------------=--~-~--~-~---~--~~-------_.

2000~. ~~~ 1500 h ~ --1000

500 -- .", o

Year

The Graph 3.2 shows the growth of exports over the period 1974-75 to 2004-2005_

There is significant increase in exports throughout the period, but there arc ups and

down 100. The leather industry in India has undergone substantial structural changes.

The Government has set up various committees (The Seetharamiah Committee 1973,

Kaul Committee 1979 and Pande Committee, 1989) based on which large-scale

expansion and diversification and modernisation has taken place. The qualitative and

quantitative changes introduced have shifted emphasis from export of raw hides and

skins and semi-finished leather to value added finished products (Sinha and Sinha

1992). An important feature is that the importance of leather footwear sector. The

cxport value of footwear is highest among leather and leather products. The export of

leather and leather products is a significant aspect of Indian leather industry. The

Leather industry is a labour intensive industry and has great potential for employment

generation. The following section discusses other aspects of the leather industry in

India that includes growth of employment, labour productivity, money wage rate and

real wage rate.

Section 2

3.2 Data Source and Methodology

The data source and methodology used to analyse growth of employment, labour

productivity, real wage rate, money wage rate etc are explained in this section. The

data source used in the study is Annual Survey of Industries (AS!) published by the

Central Statistical Organisation of the Government of India. Annual Survey of

68

Leather lndllsliy in India and Tamil Nadu-Macro Level Ii'ends

Industries (ASI) data provides statistical infonnation related to changes in growth,

composition and structure of the organized manufacturing sector comprising activities

related to manufacturing processes, repair services, generation, transmission etc. of

electricity. gas and water supply and cold storage. It publishes data on the organized

sector, that is the factory sector, factories registered under Factories Act 1948,

employing 10 or more workers and using power and those employing 20 or more

workers but not using power on any day of preceding 12 months.

For the purpose of AS!' the factories in the frame are classified into two sectors, the

census and the sample or non-census sectors. While the factories employing I 00 or

more workers constitute the census sector and the remaining factories constitute the

sample sector. The present study used the data from 'summary results offilctory

sector' published in various issues and gives combined data for census sector and

sample sector.

The NIC-1970 was used to classify factories from ASI 1973-74 to ASI 1988-89. NIC

-1987 was introduced and this was followed till ASI 1997-98. From ASI 1998-99. the

new series of classification. NIC- 1998 was introduced. Until 1997-98, ASI provides

data at two-digit level for 24 groups, at three-digit level for 196 industry groups and at

four-digit level for 288 industry groups. ASI 1998-99 provides data at three-digit

level for 68 industry groups by states/UTs and data at four-digit level for 153 industry

groups by all India level. Two-digit level and three digit level classification of

National Industrial Classification (NIC) is considered for the analysis. For two-digit

level classification, the data is analysed, from 1974-75 to 1999-2000 and for three

digit level classification the data is examined from 1974-75 to 1997-98. There is no

particular merit associated with the selection of years. For the Leather industry 111

Tamil Nadu, only the data based on two-digit classification is analysed and IS

examined for the period, 1974-75 to 2000-200 1.

The data on all India Consumer Price Index for industrial workers (CPI-IW) is from

http:// www.rlli.orQ.in!sec7!56357 and the data on all India Wholesale Price Index for

Leather and Leather Products (WPI-LP) is from http://www.indiastat.com!india. The

Tamil Nadu Consumer Price Index for industrial workers (CPI-IW-TN) is taken from

different issues of the Indian Labour Year Book published by the Government of

India, Ministry of Labour Bureau. The Tamil Nadu Wholesale Price Index tor Lcather

69

Leather Industry in India and Tamil Nadu-Macro Level Trends

and Leather Products is taken from a number of issues of Economic Appraisal

published by the Evaluation and Applied Research Department, Government of Tamil

Nadu.

Table 3.4 National Industrial Classification (NIC-1987, NIC- 1998) for Leather Industry

Industry Code group Manufacture of Leather and Products of Leather, division (three/ Fur & Substitutes of Leathcr (two-dioit) four-digit) 29 290 Tanning. curing, finishing, embossing and japanning of

leather 291 Manufacture of footwear (excluding repair) except of

vulcanized or moulded rubber or plastic. 292 Manufacture of wearing apparel of leather and

substitutes of leather 293 Manufacture of consumer goods of leather and

substitutes of leather other than apparel and footwear 294 Scrapping, currying. tanning, bleaching and dyeing of

fur and other pelts for the trade. 295 Manufacture of wearing apparel of fur and pelts 296 Manufacture of fur and skin rugs and other similar

articles 299 Manufacture of leather and fur products n.e.c

National Industrial Classification (NIC-1998) for Lcather Industry 191 Tanning and dressing of leather, manufacture of luggage

handbags, saddlery & harness

1911 Tanning and dressing ofleather 1912 Manufacture of luggage, handbags, and the like,

sadd lery and harness 192/1920 Manufacture of footwear

Methodology

The study examined variables such as total number of workers, money wages, annual

average wage, real wages at 1982 prices, value added per worker at current prices and

at 1981 prices, value of output per worker at current prices and at 1981 prices, share

of wages in value added and value of output in the factory sector of the leather

industry at the all India level and tor the leather industry in Tamil Nadu.

Workers include, all persons employed directly or through any agency; whether for

wages or not; and engaged in any manutacturing process or in cleaning any part of the

machinery or premises used for manufacturing process or in any other kind of work

incidental to or connected with the manufacturing process or the subject of the

70

Lea/her Indus/I)' in India and Tamil Nadl/-Macro Level Trends

manufacturing process; labour engaged in the repair and maintenance or production of

fixed assets for factory's own use or labour employed for generating electricity or

producing coal, gas are included.

).> Annual average wage is calculated by dividing the total wages by total number

of workers.

).> Real wages at 1982 prices arc calculated by deflating the money wages by all

India consumer price index for industrial workers (CPI-IW) with base year

1982.

).> From 1970-71 to 1983-84 the all India consumer price index is available with

1960 as the base year, whereas from 1983-84 to 2002-2003, it is available with

1982 as base year. The study converted the CPI-I W series of 1974-75 to 1981-

82 from 1960 base year to 1982 as base year. This was done by splicing the

index number. Splicing is converting the two different base year index

numbers into one base year index number. Here the index number is converted

from 1960 as base year to 1982 as base year (refer Table 1.1 in Appendix I).

The splicing formula is,

Spliced Index No. = Index number of current year x Old index number of new base year 100

).> The Tamil Nadu Consumer Price Index for industrial workers is given for

major centres in the state, which includes Chennai, Coimbatore, Coonoor,

Madurai, Salem and Trichirapally. Until 1988, CPI-IW was given for four

centres (Chennai, Coimbatore, Coonoor, Madurai) and from 1989, the two

other centres were included. The CPI-I W For Tamil Nadu is calculated by

taking the simple average of major centres (refer Table 1.3 in Appendix I).

).> Net Value added is the increment to the value of goods and services produced

by the factories, which is obtained by deducting the value of inputs and

depreciation from the value of output. Value added per worker at current

prices is calculated by dividing the net value added (NVA) by total number of

71

Lea/her Industry in India and Tamil Nadu-Macro Level Trends

workers. Value of output per worker at current prices is calculated by dividing

the value of output by total number of workers.

> Value added per worker and value of output per worker at 1981 prices IS

calculated by detlating using Wholesale Price Index for leather and leather

products (WPI-LP) with 1981 as base year. From 1974-75 to 1988-89 the

WPI-LP is available at 1970 as base year and from 1982-83 to 1999-2000, the

WPI-LP is available with 1981 as base year. By splicing the index number,

WPI-LP for the period, 1974-75 to 1980-81 has been converted trom 1970 as

base year to 1981 as base year (refer Table 1.2 in Appendix I).

> For Tamil Nadu, the value of output per worker and value added per worker is

deflated by using the Tamil Nadu Wholesale Price Index for leather and

leather products (WPI-LP-TN) with 1981 as base year. The Wholesale Price

Index for leather and leather products (WPI-LP-TN) is available at 1970

prices. The study calculated the Wholesale Price Index for leather and leather

products (WP.I-LP-TN) at 1981 prices by base shifting method (refer Table 1.4

in Appendix I). Base shifting is calculated by using the formula,

Index number for 1981 = Index numbers at 1970 prices Index number for 1981 at 1970 prices.

Compound Growth Rates

To measure the growth rates of variables over a period, compound growth rate is

estimated. Compound Growth Rate (CGR) is estimated by using the semi log method.

This regression model is called a semi log model because the dependent variable is

'log Y' and the independent variable is 'I' which takes values (1),3 etc.). The slope

coefficient '~2' measures the constant proportional or relative change in Y for a

given absolute change in independent variable 'I'.

~2 = relative change in Y Absolute change in t

72


The coefficient ~2 trend variable gives instantaneous rate of growth (at a point of

time) and not compound rate of growth. The compound rate of growth is calculated

by taking the antilog of~2. subtracting 1 from it and then multiplying it by 100.

Section 3

3.3 The Leather Industry in India - An Aggregate Analysis

Considerable literature exists on the macro level trends in organised manufacturing

sector. Some relevant studies are discussed in this section. The study by Tulpule and

Datta (1989) examined the behaviour of real wages, productivity, and the share of

wages in the value of output and value added in selected industries, such as sugar,

cotton textile, paper and paper products, petroleum refining, cement. leather, iron and

steel and coal mining over the period 1967-1984 using Annual Survey of Industries

(ASI) data. This study highlights the case of leather industry. The authors categorized

the leather industry as low capital intensive and low wage sector. The authors attempt

to explain that real wages renect the importance of the industries in the national

economy and the organized strength of the workers. Overall the leather industry does

not show a better performance than other industrial sectors.

Jose (1994) made an attempt to analyse the trends in earnings, employment and

productivity in 19 groups of industries using AS[ data for the period 1970-7 [ to 1987-

88. He analysed the trend for the sub periods, 1970-71 to J 979-80 and 1980-81 to

1987-88. He categorized the selected industries as [ow wage and high wage industries.

The leather industry is included among the low wage industries. A major finding of

the study is that, the decline or deceleration in growth of employment and increase in

worker productivity levels could be due to the outcome of structural reforms and

techno[ogical changes introduced in manufacturing industries of India. There are also

inter-industry differences in worker productivity levels due to rationalization in the

development of labour. [mprovements in the productivity levels could be the reason

for the increase in the real earnings of employee, which is more pronounced in high

wage industries.

Pais (2002) examined the pattern of casual employment in Indian manufacturing

using National Sample Survey (NSS) data for the period of [983 to 1993-94. The

analysis was based on data at the aggregate level and at the disaggregate [evel based

73

Leather industry in India and Tamil Nadu-Macro Level Trend,

on two-digit, and three digit level classification. The study reveals that at the

aggregate level there is an overall decline in the incidence of casual labour in the

manufacturing sector for male and female labour. However, this decline was not

uniformly spread across industries disaggregated at two-digit and three-digit levels.

For the leather industry at the two-digit level, there was a small but increasing

incidence of male and female casual labour. But during the year 1993-94 at the three

digit level, there was a high incidence of male casual labour in tanning and finishing

of leather and in manufacture of leather consumer accessories.

Ramaswamy (2003) investigated the association between subcontracting practices and

labour market outcomes during the reform period. This study uses the Annual Survey

of Industries (AS I) data to analyse the organized factory sector and National Sample

Survey (NSS) data for the unorganised industry. The major findings of the study are,

that during the 1990s, the valuc of subcontracting activity was growing at a faster rate

than the growth rate of output in organized manufacturing. However, there is large

inter industry difference in terms of contract intensity. During the reform period, there

is no widening of real earning diflerentials in aggregate manufacturing and there is no

systematic association between subcontracting intensity and real earnings inequalities

within industries. Ramaswamy concludes that there are no negative labour market

outcomes in terms of widening earning differentials, growth of real earnings, and

employment in contract intensive industries.

Macro level studies give an aggrcgate picture of the organized manufacturing sector.

Even though the studies reviewed above carried out analysis at the disaggregate level,

the interpretation of the results is based on the trends of majority ofthe industries. But

few sectors like the leather industry do not reflect the overall trend. Therefore, there is

a need to understand the macro level trends for specific industries such as leather

industry. Hence this section specifically focuses on the macro level trends in the •

organised sector of the leather industry in India and Tamil Nadu.

This section explains the analysis based on two-digit classification which gives the

aggregate picture of the leather industry in India. The data collected are given in

Appendix I Table 1.5.

74

•

Leather Industry in India and Tamil Nadu-Macro Level Trend,'

Table 3.5 Capital Intensityand Value Added Per Worker Year Capital WageslVA WPI-LP- VA per VA per

Intensity at current 1981 worker work (ICINVA) prices (%) prices at current at 1981

prices prices 1974-75 2 39 50 9493 18986 1975-76 2.8 37 57 9502 16671 1976-77 2.3 38 62 10996 17736 1977-78 2.8 39 62 11042 17810 1978-79 2.9 41 72 11206 15564 1979-80 2.9 39 94 14713 15652 1980-81 2.9 42 103 14100 13689 1981-82 3.1 44 100 14470 14470 1982-83 2.8 41 100 16263 16263 1983-84 2.5 37 108 21522 19928 1984-85 2.2 36 115 23868 20755 1985-86 2.7 41 128 21868 17084 1986-87 2.7 42 134 22876 17072 1987-88 2.4 38 143 29248 20453 1988-89 2.8 37 168 28240 16810 1989-90 2.6 34 186 35349 19005

1990-91 • 2.6 37 224 29931 13362 1991-92 2.1 25 234 61453 26262 1992-93 2.5 27 228 66481 29158 1993-94 1.9 17 245 105105 42900 1994-95 3.2 24 262 76282 29115 1995-96' 2.8 20 277 94499 34115 1996-97 3.3 27 281 87480 31131 1997-98 2.7 24 291 112111 38526 1998-99' 2.3 22 297 140759 47394 1999-2000 2.9 21 309 137717 44568

Source: value added per worker at current prices is from CSO. Annual Survey of Industries, 'Summary Results of Factory Sector' (Various Issues), New Delhi. WPILP is from http://www.indiaSlal.com/india

Note: *- The data is unavailable for these years and we estimated based on the trend of the series. IC is invested capital, VA is value added; WPI-LP is wholesale price index for leather and leather products.

75


a e T bl 3 6 A verage A nnua IW age an dR IW ea a e Year Total Wages to Average CPI-IW RAAW Index No

Workers workers Annual wage for At RAAW (Rs.lakhs) (Rs.) 1982 prices 1982 prices 1974=100

1974-75 37427 1393 3721 65 5726 1975-76 25373 890 3507 64 5481 1976-77 41023 1727 4209 62 6790 1977-78 41306 1772 4289 67 6403 1978-79 48804 2249 4608 68 6777 1979-80 48720 2777 5699 74 7703 1980-81 48603 2859 5882 83 7087 1981-82 51065 3239 6342 93 6820 1982-83 52249 3507 6712 100 6712 1983-84 52458 4228 8059 111 7261 1984-85 58760 5095 8670 118 7348 1985-86 60473 5375 8888 126 7054 1986-87 59686 5784 9690 137 7074 1987-88 64448 7085 10993 149 7378 1988-89 77836 8031 10317 163 6330 1989-90 87565 10591 12095 173 6991 1990-91 • 78510 87088 11093 193 5747 1991-92 90270 13945 1)448 219 7054 1992-93 91329 16193 17730 240 7388 1993-94 96362 17448 18106 258 7018 1994-95 109926 19898 18101 274 6606 1995-96' 106757 21649 19164 313 6122 1996-97 108734 25445 23401 342 6842 1997-98 101112 27141 26842 366 7334 1998-99' 93490 28837 30845 414 7450 1999-2000 991 18 28290 28541 428 6669

Source: Total workers and wages from CSO, Annual Survey of Industries, 'Summary Results of Factory Sector' (Various Issues), New Delhi. CPI-IW is from http:// www.rbi.org.in!sec7!56357.

Note: '- The data is unavailable for these years and we estimated based on the trend of the series. CPI-IW is Consumer Price Index for Industrial Workers and RAA W is Real Annual Average Wage.

From the Table 3.5 it can be seen that the leather industry is a low capital-intensive

sector. The ratio of invested capital to value added in 1999-2000 is 2.9. Likewise, the

share of wages in value added reduced from 39 percent in 1974-75 to 21 percent in

1999-2000. The increase in real wages has lagged far behind the increase in value

added per worker at constant prices, that is labour productivity. But overall, there is a

rising trend in the number of workers employed, money wages, real wages, value

76

100 96

119 112 118 135 124 119 117 127 128 123 124 129 III 122 100 123 129 123 115 106 119 128 130 116

Lea/her Indus/I)' in India and Tamil Nadu-Macro Level Trends

added per worker at current prices and value added per worker at 1981 prices (refer

Tables 3.5 and 3.6).

Table 3.7 Annual Compound Rates of Growth in Leather Industry in India (1974-75 to 1999-2000)

Variables Compound Growth Rate (%)

1974-75 to 1974-75 to 1981-82 to 1990-91 to 1999-2000 1980-81 1989-90 1999-2000

Value added per worker at 30.5 18.7 24.9 35.6 current prices Value added per worker at 9.8 -10.8 4.1 24.3 1981 prices (Labour Productivity) Money Wage Rate 36.6 47.1 37.9 31.2 Employment 12 20.4 15.6 4.6 Real Wage Rate at 1982 0.7 11.4 -0.3 -2.2

Note: *- significant at I percent level. **- significant at 5 percent level and *** -significant 10 percent level.

Over the period 1974-75 to 1999-2000. there is a significant growth rate of all the

variables, employment at 12 percent, money wages at 37 percent, value added per

worker at current prices at 31 percent, value added per worker at 1981 prices at 10

percent in the factory sector of the leather industry. But the real wage rate has a very

low growth rate, of less than one percent over the years and is statistically

insignificant (refer Table 3.7).

In order to understand the decadal growth in the nineteen seventies, eighties and

nineties, three different periods 1974-75 to 1980-81, 1981-82 to 1989-90 and 1990-91

to 1999-2000 have been studied. When the years are divided and growth rates are

analysed, a different picture emerges. In the period 1974-75 to 1980-81, all the

variables show significant growth rate, except value added per worker at 1981 prices,

which shows a significant negative growth rate. It brings out the fact that during this

period, there is a tradeoff between the growth of employment and the productivity

front.

However, there is a reversal of this trend in the subsequent decade. A striking

observation is that for the period 1981-82 to 1989-90, the growth of money wage rate

has declined slightly by 38 percent while the growth of employment declined

drastically to 16 percent. Real wage rate has shown a negative growth rate since 1982-

77

Leather IndustlY in India and Tamil Nadu-Macro Level Trends

83. The index number of real wage rate has increased only by 16 percent over a

period of 26 years. It is not a drastic increase, but there are ups and downs over the

period (reter Table 3.6). During the period 1980-81 to 1989-90 the growth rate of

value added per worker at 1981 prices (labour productivity) is 4 percent whereas

there is a drastic increase trend from the 1990s. Gangopadhyay and Wadhwa (1998)

explained that labour productivity could be increased in three ways.

• Labour can become more skilled over time, embodying greater amounts of

human capital.

• New capacities can come up using better technology that increases the

quantity of output produced from the same amounts of inputs, including

labour.

• New techniques that substitute capital for labour can also increase output per

worker.

While the first two are usually good for labour and the third may reduce the growth of

employment.

A significant trend is that aiter liberalisation (1990-91 to 1999-2000), there is a drastic

increase in labour productivity. But the worker concerned factors, that is money wage

rate. employment and real wage rate show a declining trend. Compared to the I 980s,

the growth of money wage rate declined to 3 1.2 percent and growth of employment

declined drastically to 4.6 percent. Likewise, the real wage rate shows a negative

growth rate.

As Table 3.5 shows. leather industry is a low capital-intensive sector and it cannot be

argued that deceleration in employment and real wages is due to substitution of

capital for labour. It could be due to the fragmentation of the production process,

which implies that the growth of employment is reduced in the organized sector and

more employment is generated in the unorganised part of the leather industry. On the

whole, when production is combined from both the organised and the unorganised

sectors, the labour productivity could be increasing, but the employment gives a

decelerating picture.

78

Leather Industry in India and Tamil Nadu-Macro Level Trend5

The study put forth this argument because the informal manufacturing is part and

parcel of this sector. Table 3.8 shows the contribution of domestic product by

registered and unregistered manufacturing in the leather industry. The Table reveals

that the contribution by unregistered manufacturing (Rs. 3022 crores) is higher than

registered manufacturing (Rs. 1767) in 2000-200 I.

Table 3.8 Gross Domestic Product of the Leather Industry from Registered and U . dM f . nreglstere anu acturmg

Year Registered Manufacturing Unregistered (at current prices) Rs. in Manufacturing

Crores (at current prices) Rs. in Crores

1980-81 77 233 1984-85 160 293 1985-86 154 341 1986-87 157 365 1987-88 228 390 1988-89 271 453 1989-90 372 500 1990-91 463 617 1991-92 489 628 1993-94 1118 1346 1995-96 1019 1581 1996-97 926 1759 1997-98 1319 1911 1998-99 1457 2136 1999-2000 1650 2821 2000-2001 1767 3022

Source: Government of India, Handbook of industrial policy and statistics, Ministry of Commerce and Industry, New Delhi (various issues). Note: Numbers in parenthesis shows the percentages to the total.

From the analysis it can be said that in the leather industry, there is a rise in money

wages and real wages but the real wages recorded the growth of less than one percent.

As Tulpule and Datta (1989) mentioned the picture of real wages and relative increase

in them suggests that importance of an industry in the national economy and

bargaining power of workers in the industry are the most important determinants of

real wages and more importantly of rate of increase of real wages. The importance of

the leather industry in India stems from two angles, earnings of foreign exchange and

employment generation. But the growth rate of real wages implies the low bargaining

pOlVer of the lVorkers in the organised part of the leather sector.

79

Leather industry in india and Tamil Nadl/-Macro Level Trends

Thus, tram the above discussion it can be inferred that the leather industry in India is

a low wage industry and workers in the organised sector has less bargaining power,

Since 1980s there is an increasing trend in labour productivity and deceleration in

employment and real wages of workers, In the leather industry, informal production

operations playa major role, which cannot be accounted in this aggregate data.

Section 4

3.4 The Leather Industry in India -Disaggregate Analysis

This section analyses the leather industry in India on an all-India level based on a

three-digit classification and extends the analysis to a comparison within the sector.

The data for the period 1974-75 to 1997-98 has been taken tor the three-digit

classification of leather industry. For the convenience the three digit classification,

290 is represented as leather tanning industry, 291 as leather footwear industry. The

data tor 292,293,294,295 296 and 299 are added together and analysed because there

is no continuous data available for these sectors (for the description of three digit

classification, reter Table 3.4). These sectors together are represented as leather

goods and fur products sector. The data collected for these three sectors are given in

the Appendix 1 in Tables 1.6, 1.7, and 1.8.

80

Leather Induslry in india and Tamil Nodu-Macro Level 7"ends

Table 3.9 NIC-290 Leather Tanninglndustr ' (1) Total

Total Average

CPI-JW Index of

Year wages

workers annnal wage

for 1982 RAAW Real

in (Rs. 290

rate at current Prices

1982 wage Lakhs) prices (Rs.) 1974=100

1974-75 531 17767 2989 65 4598 100 1975-76 614 17916 3427 64 5355 116 1976-77 825 22991 3588 62 5788 126 1977-78 781 21957 3557 67 5309 115 1978-79 1056 23728 4450 68 6545 142 1979-80 1211 25943 4668 74 6308 137 1980-81 1237 25269 4895 83 5898 128 1981-82 1512 27019 5596 93 6017 131 1982-83 1606 25497 6299 100 6299 137 1983-84 1817 26029 6981 II I 6289 137 1984-85 2195 30387 7223 118 6122 133 1985-86 2408 30973 7775 126 6170 134 1986-87 2661 28905 9206 137 6720 146 1987-88 2970 29980 9907 149 6649 145 1988-89 3572 34279 10420 163 6393 139 1989-90 4808 40646 I I 829 173 6838 149 1990-91 * 3854 36443 10577 193 5480 119 1991-92 5803 34649 16748 219 7647 166 1992-93 5784 31164 18560 240 7733 168 1993-94 5848 29416 19880 258 7706 168 1994-95 7222 33108 21813 274 7961 173 1995-96 7291 31147 23408 313 7479 163 1996-97 7612 30130 25264 342 7387 161 1997-98 7698 28225 27274 366 7452 162

Source: Total workers and wages from CSO, Annual Survey of Industries, 'Summary Results of Factory Sector' (Various Issues), New Delhi. CPI-IW is from http:// www.rbi.orQ.in/sec7/56357. Note: *- The data is unavailable for these years and we estimated based on the trend of the series. CPI-IW is Consumer Price Index for Industrial Workers and RAA W is Real Annual Average Wage.

81

Leather Indusl1Y in India and Tamil Nadu-Macro Level Trend~

Table 3.10 NIC-290 Leather Tanning Industry (2)

~ ~ '" :::.:: "O~ '" ... ... " " .. - <I,) .:: ... - ..... C c .. - " _00

-~ ~ c..= c.. ... " = '':;; = '" .." '" ·c " _ c.. ~ " ,,0-,

.." .. c.. - ... - ... c.. ..... ii< c.."

'" <.I = ... = ..... ... - ... -.~ <I,) 'i: ..... c..=

'" c..oo .." = '" = '" ... -;;. = .. -= c..

00 ... " " -0-, " " " o '- 8 '" =~ -2 c.. 0-,

:::::I _ :; g ..... .." - " " - o ~ ·c "0 ':'!: 'C ~ aJ .-'" ... '" ... 0.:.: .. >- ,SU " = ;> c: ,

"" .. c.. ...... ::'>I I.. Co. .. c.. ..... - " :., o " o " " '" .. ... " .. = :: . - .... '" .. ...:.: .. .. =.:.: 1: c.. ~ ; .. ..

...!, .. = = .. .:~ - .. " " '" " :., - 0 " :: ;;. .. U '-'

~- " ;- " .. ;;. 1: .. ... ~ ;;. ~ ;;. :: c.. ,. " 1:

1974-75 2.6 3.6 29 50 82625 165250 10362 20724 1975-76 3.1 3.6 33 57 93922 164775 10354 18165 1976-77 3.3 3 31 62 117681 189808 11452 18471 1977-78 3.9 3.1 31 62 114469 184628 11418 18416 1978-79 4 0 32 72 132004 183339 13714 19047 1979-80 4.2 2.4 31 94 192048 204306 14964 15919 1980-81 4.2 3.1 34 103 153983 149498 14611 14185 1981-82 4.5 3.5 39 100 158862 158862 14456 14456 1982-83 4.1 3.9 37 100 163278 163278 16833 16833 1983-84 3 4 26 108 172515 159736 26659 24684 1984-85 2.9 3.8 31 115 188146 163605 23280 20243 1985-86 4.2 3.7 40 128 212408 165943 19527 15255 1986-87 4 4 42 134 232060 173179 21847 16304 1987-88 3.5 3.2 35 143 305324 213513 28366 19836 1988-89 3.2 3.3 31 168 312465 185991 34173 20341 1989-90 3.2 3.6 32 186 324740 174592 36427 19584 1990-91 * 3.4 3.4 34 224 313123 139787 31331 13987 1991-92 2.5 3.9 26 234 429294 183459 63915 27314 1992-93 2.9 3.9 28 228 471871 206961 66564 29195 1993-94 2.7 3.2 21 245 630643 257405 93082 37993 1994-95 3.7 3 27 262 717757 273953 81231 31004 1995-96 4.5 3.2 27 277 726346 262219 85979 31039 1996-97 4.7 3 28 281 837969 298210 88994 31671 1997-98 3.5 2.9 22 291 925368 317996 124680 42845

Source: value added per worker and value of output at current prices is from CSO, Annual Survey of Industries, 'Summary Results of Factory Sector' (Various Issues), New Delhi. WPI-LP is from http://www.indiastat.comiindia


82

Leather Industry in India and Tamil Nadl/-Macro Level Trends

Table 3 II NIC 291 Leather Footwear Industry (I) -

Total Average CPI-IW Index of

Total annual real Year wages workers for 1982 RAAW1982

(Rs.Lakhs) wage prices wage

rate (Rs) 1974=100 1974-75 831 17824 4662 65 7173 100 1975-76 238 5873 4052 64 6332 88 1976-77 867 16539 5242 62 8455 118 1977-78 951 17808 5340 67 7971 III 1978-79 1139 23022 4947 68 7276 101 1979-80 1496 20482 7304 74 9870 138 1980-81 1542 20935 7366 83 8874 124 1981-82 1629 21510 7573 93 8143 114 1982-83 1794 24104 7443 100 7443 104 1983-84 2282 23858 9565 I I I 8617 120 1984-85 2743 25309 10838 118 9185 128 1985-86 2788 26295 10603 126 8415 117 1986-87 2846 26077 10914 137 7966 III 1987-88 3696 28730 12865 149 8634 120 1988-89 3801 35703 10646 163 6531 91 1989-90 4762 35850 13283 173 7678 107 1990-91 * 4258 34683 12276 193 6361 89 1991-92 6185 38956 15877 219 7250 101 1992-93 7800 42111 18522 240 7718 108 1993-94 8354 44234 18886 258 7320 102 1994-95 8466 51622 16400 274 5985 83 1995-96 12192 53199 22918 313 7322 102 1996-97 13063 55126 23697 342 6929 97 1997-98 13006 49204 26433 366 7222 101

Source: Total workers and wages from CSO, Annual Survey of Industries, 'Summary Results of Factory Sector' (Various Issues), New Delhi. CPI-IW is from http:// www.rbi.orl!.in/sec7/56357.

Note: *- The data is unavailable for these years and we estimated based on the trend of the series. CPI-IW is Consumer Price Index for Industrial Workers and RAA W is Real Annual Average Wage.

83

Leather industry in India and Tamil Nadll-Macro Level Trend,

Table 3.12 NIC-291 Leather Footwear Industry (2)

1974-75 1.3 17 51 50 27424 54847 9190 18380 1975-76 1.9 9.9 53 57 40814 71603 7645 13413 1976-77 0.9 14.3 49 62 36520 58903 10660 17193 1977-78 1.4 13.4 50 62 39690 64016 10742 17326 1978-79 1.5 14.9 56 72 33203 46115 8835 12271 1979-80 1.2 13.4 49 94 54321 57788 15028 15987 1980-81 1.3 12.7 52 103 57788 56105 14048 13639 1981-82 1.4 I 1.1 51 100 67843 67843 14723 14723 1982-83 1.3 9.5 47 100 77995 77995 15981 15981 1983-84 1.7 11.5 57 108 83025 76875 16661 15427 1984-85 1.3 10.5 43 115 102956 89526 25311 22010 1985-86 1.5 9.3 44 128 114623 89549 24271 18962 1986-87 1.6 9.3 44 134 117249 87499 24558 18327 1987-88 1.5 9 42 143 143091 100064 30397 21257 1988-89 2.6 7.8 50 168 136947 81516 21421 12751 1989-90 2.2 7.2 39 186 185001 99463 34204 18389 1990-91 * 1.9 8.2 43 224 149056 66543 28260 12615 1991-92 1.9 5.7 28 234 277903 118762 56251 24039 1992-93 2.4 6 31 228 306352 134365 60523 26545 1993-94 1.6 4.4 17 245 426543 174099 107922 44050 1994-95 3.2 4 22 262 410718 156763 75578 28847 1995-96 3 5.6 34 277 409141 147704 67620 24411 1996-97 2.9 5.6 32 281 426100 151637 73996 26333 1997-98 2.3 4.2 25 291 627185 215527 105768 36346

Source: value added per worker and value of output at current prices is from CSO, Annual Survey of Industries, 'Summary Results of Factory Sector' (Various Issues), New Delhi. WPI-LP is from http://www.indiastat.com/india

Note: *- The data is unavailable for these years and we estimated based on the trend of the series. Ie is invested capital, VA is value added; WPI-LP is wholesale price index for leather and leather products.

84

... " " >-

1974-75 1975-76 1976-77 1977-78 1978-79 1979-80 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 * 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98

Leather Industry in India and Tall/il Nadu-Macro Level Trends

Table 3.13 Leather Goods and Fur Products Industry (1)

-30 1798 1669 65 2567 100 38 1584 2399 64 3748 146 35 1493 2344 62 3781 147 40 1535 2606 67 3889 151 54 2054 2629 68 3866 151 60 2133 2813 74 3801 148 74 2320 3190 83 3843 150 98 2536 3864 93 4155 162

107 2648 4041 100 4041 157 133 2662 4996 11 I 4501 175 157 3064 5124 118 4342 169 180 3205 5616 126 4457 174 278 4704 5910 137 4314 168 420 5738 7320 149 4912 191 658 7854 8378 163 5140 200

1021 11069 9224 173 5332 208 597 7395 8074 193 4183 163

1958 16665 11750 219 5365 209 2608 18054 14446 240 6019 234 3239 22656 14296 258 5541 216 4186 24893 16816 274 6137 239 4479 25645 17465 313 5580 217 4795 23580 20335 342 5946 232 6474 23850 27145 366 7417 289

Source: Total workers and wages from CSO. Annual Survey oflndustries, 'Summary Results of Factory Sector' (Various Issues), New Delhi. CPI-IW is from http:// www.rbi.orQ.in!sec7/56357.

Note: *- The data is unavailable for these years and we estimated based on the trend of the series. CPI-IW is Consumer Price Index for Industrial Workers and RAA W is Real Annual Average Wage.

85

Leather Industry in india and Tamil Nadu-Macro Level Trends

Table 3.14 Leather Goods and Fur Prodncts Industry (2) ~

~ -.... - .; , c ~ - -..... ... = ....... e il _ 0 ....

::I - ~ = go '""":' '" " "00 .;;; ", ... ~ ,.~ "" c:..'" c:.. _ '" c:.. ... ~ c:..,~

il~ -=;~ '" , - ... '" - .. Q:! 'C ... '" 'C ..... '" ~ " -00 ::I " '"

::I ~ '" "~ ",ooQ:! ... -;> "'U~ ;> .:= , c..:.= u c ... '" 'C u 'C-~

'" .sz i( - '" ~ ... p., ~ :a... ';: c-~Q)

'C - '" "C ~ (Il

'" '" " '" c:.. ...l e c c:.. " " " >- - ~ " - o '"" .:= !lS l.. ~

.~ ~ '" u " :=: -... U ::l.I ...... -

OJ> = ,.!. " c ... ::l.I <:.l .- ::l.I ~ .-OJ> " ... '" '" p., ::I ... = .a :=: Co " ..:.= ... " ..:.= ... :!!I Q., Co ... ~ c:.. ~ t: ~ - '" '" '" ........

_ ... c:.. - 0 -

'" :s -= ~ c.. t..

" C '" > U ::I ;;. ... ;;.",00 ;> :=: ;> ~ e " Co u u

1974-75 2.3 6.4 41.7 50 26196 52392 4004 8009 1975-76 2.1 5.4 35.1 57 44571 78194 6818 11962 1976-77 2 5.4 30.4 62 43269 69788 7703 12424 1977-78 2.1 5.1 28.1 62 50945 82169 9251 14921 1978-79* 1.9 6.2 29.8 72 42332 58794 8812 12239 1979-80 2.2 5.2 33.5 94 53633 57057 8392 8928 1980-81 3.5 4.6 44 103 68621 66622 7241 7030 1981-82 2.3 4.8 31 100 80205 80205 12461 12461 1982-83 1.9 4.7 30.3 100 85159 85159 13293 13293 1983-84 2.1 5.9 31.4 108 85387 79062 15890 14713 1984-85 2.5 5.7 28.8 115 90601 78783 17787 15467 1985-86 1.7 5.3 22.7 128 106802 83439 24774 19355 1986-87 1.9 4.9 29.7 134 119579 89238 19898 14849 1987-88 1.8 3.5 26 143 209638 1465100 28128 19670 1988-89 1.7 3.7 25.1 168 227324 135312 33333 19841 1989-90 2.1 3.8 26.2 186 243319 130817 35098 18870 1990-91 * 1.9 3 26.1 224 266826 119119 30868 13780 1991-92 1.6 3.2 17.1 234 365155 156049 68497 29272 1992-93 2 3.7 18 228 395104 173291 80232 35189 1993-94 1.6 3.1 12.3 245 459075 187377 1 J 5435 47116 1994-95 2.6 3.8 23.8 262 438449 167347 70634 26960 1995-96 2.5 2.9 16 277 583892 210791 108727 39252 1996-97 2.6 ,

17.2 281 661722 235488 J J 8346 42116 j

1997-98 2.5 3.6 24.8 291 748763 257307 109577 37655

Source: value added per worker and value of output at current prices is from CSO, Annual Survey of Industries, 'Summary Results of Factory Sector' (Various Issues), New Delhi. WPI-LP is from http://www.indiastat.com/india


86

Year

Code

1 2. 3. 4. 5. 6. 7.

Leather IndustlY in India and Tamil Nadu-Macro Level T)'ends

In 1997-98, among the three groups of industry, organized sector employment is high

in leather footwear sector that is 49204 followed by leather tanning 28225 and then

leather goods sector of23850 workers (refer Tables 3.9, 3.11 and 3.13).

During 1974-75 to 1997-98, in all the three sectors the share of wages in value of

output and value added is drastically reduced (refer Tables 3.10, 3.12 and 3.14). Real

wages are lagging far behind the labour productivity i.e. value added per worker at

constant prices. The estimated index of real wages (1974=100) shows that, highest

increase in real wages is in leather goods sector of 189 percent followed by leather

tanning sector of 62 percent. But in leather footwear sector real wage has increased

only by one percent. It is not drastic increase but there is a wide fluctuation III

increase in real wage rate over the years (refer Tables 3.9, 3.11, and 3.13).

Table 3.15 Annual Compound Growth Rates in Le:lther Tanning, Footwear and Leather Goods and Fur Products Sector

Compound Growth rate

1974 to 1997 1974 to 1980 1981 to 1989 1990 to1997

290 291 OTH 290 291 OTH 290 291 OTH 290 291 28.8 29.2 39.6 17.3 22.2 21.1 25.3 23.1 36.8 38.8 33.7 7.5 7.8 16.6 11.9 -7.5 -8.5 4.6 2.6 14.0 26.5 21.8 25.8 35.2 38.6 32.3 24.9 30.5 26.7 30.4 43.7 40.3 42.9 5.0 12.9 15.6 -0.8 -5.1 -0.7 5.5 8.6 19.9 27.8 30.2 31.9 37.8 79.9 40.6 61.2 39.6 36.7 33.6 97.2' 21.s' 42.4 5.2 15.7 39.2 16.2 31.3 14.8 11.1 14.9 53.2 -6.7 14.8 3.9 r 1.5 6.9 10.4 11.9 10.9 3.0 -3.0 7.5 5.4 0.8

Note:

A 1. Value added per worker at current prices, 2. Value added per worker at 1981 prices, 3. Value of output per worker at current prices, 4. Value of output per worker at 1981 prices, 5. Money wage rate, 6. Employment, and 7. Real wage rate at 1982 prices

B *- significant at I percent level, **- significant at 5 percent level and *** -significant 10 percent level. OTH is 292,293,294,295,296 and 299.

From Table 3.15 find that during the period 1974-75 to 1997-98, the leather goods

and fur products sector had the highest growth rate of labour productivity (value

added per worker at constant prices), 17 percent followed by 8 percent in leather

footwear sector and leather tanning sector. The growth of money wage rate is highest

87

OTH

39.1 26.7 36.3 24.5 88.0 35.5 ' 17.8

Leather Industry in India and Tamil Nadu-Macro Level 71'emil'

in leather goods and fur products sector (80 percent) followed by 38 percent in leather

footwear sector and 32 percent in leather tanning sector.

When the growth of employment was analysed, it was found that leather goods and

fur products had the significant highest growth rate of 39 percent followed by 16

percent in the leather footwear sector. Over the years the leather tanning sector

records the lowest growth rate of employment of 5 percent. The growth rate of

nominal wage rate is not reflected in real wage rate. The leather footwear sector

records a signifIcant negative growth rate in real wage rate. But the leather goods and

fur products sector had a significant high growth in real wages of 7 percent and

leather tanning had 4 percent growth in real wages.

During the period 1974-75 to 1980-81, there was no significant growth of labour

productivity. But this period recorded the highest growth of employment in the

leather footwear sector but it was statistically insignificant. The leather goods and

tanning sector registers a significant growth rate of employment of 15 percent and 16

percent respectively. Real wages shows significant growth in all the three sectors

nearly II percent in leather goods sector and 12 percent and 10 percent in leather

footwear and tanning sector respectively.

During the period 1981-82 to 1989-90, labour productivity increased significantly by

14 percent in the leather goods sector. It has increased by 5 percent and 3 percent in

the leather tanning sector and leather footwear sector respectively but it is statistically

insignificant. During the 1980s there is a deceleration of employment in the leather

footwear and tanning sectors but in the leather goods sector, the employment has

increased by 53 percent. Compared to 1970s there is a low growth of real wage rate of

3.0 percent in the leather tanning sector and insignificant negative growth in the

leather footwear sector, whereas in the leather goods sector there is a slight decline,

but a registered 8 percent growth rate.

During the 19905 labour productivity increased in all the three sectors, nearly 27

percent growth rate in the leather tanning sector and leather goods sector and 22

percent in the leather footwear sector. However it was statistically insignificant in the

last. The growth rate of employment is reduced in all the three sectors. The leather

tanning sector shows significant negative growth rate and in leather goods it declined

88


to 36 percent. But the decline was moderate in the leather footwear sector and had 15

percent growth rate. The real wage rate shows an insignificant growth rate both in

leather tanning and leather footwear sectors and 13 percent growth rate has been

maintained in the leather goods sector.

Overall the performance of the leather goods and fur products sector is better

compared to leather tanning and leather footwear in terms of labour productivity,

employment and real wage rate. In the 1990s the labour productivity increased in all

the three sectors. Since 19805 in all the three sectors, the employment, money wage

rate and real wages sho';v a decline except real wages in leather goods sector and it has

increased since 1990s.

Section 5

3.5 Tamil Nadu Leather Industry

The present study is based on primary data collected from Ambur, Vellore district in

Tamil Nadu. Hence the study attempts to understand macro level trends in the Tamil

Nadu leather industry based on ASI data (See Table 1.9 in Appendix 1).

Table 3.16 Importance of Tamil Nadu in the Indian Leather Industry (2000-2001 )

% Share of Variables Iudia Tamil Nadu Tamil Nadu

Factories 2378 945 40 Fixed Capital (FC) 212849 71465 34 Invested Capital (lC) 472780 165567 35 Net Value Added (NVA) 115522 38135 33 Workers 114467 53465 47 Men 61866 24476 40 Women 31024 26427 85 Employed through contractors 21577 2561 12 Employees 22676 7671 34

Source: CSO, Annual Survey of Industries, 'Summary Results of Factory Sector' (Various Issues), New Delhi.

The significance of the Tamil Nadu leather industry in Indian leather industry can be

understood from the Table 3.16. The Table shows that out of total leather related

factories in India. 40 percent of the factories are located in Tamil Nadu. Out of the

total workers in the Indian leather industry, 47 percent of the workers are concentrated

89

Leather Industry in India and Tamil Nadu-.Mac/"U Level Trend5

in the Tamil Nadu leather industry. Another significant characteristic of the Tamil

Nadu leather industry is that out of total women workers in the Indian leather

industry, 85 percent of them are concentrated in the Tamil Nadu leather industry.

Table 3,17 Sector/Gender wise Distribution of workers In ac 0'1' sec or 0 ea er In USlry In am. a U m -f t t f I th . d t . T '1 N d . 2000 2001

Sector Tamil Nadu Workers Men Women Employed

through contractors

Tanning and dressing of 26261 17405 7339 1516 leather, manufacture of (49.0) (71.0) (28.0) (59.0) luggage handbags, saddlery & harness (19111911)* Manufacture of footwear 27204 7071 19088 1045 (192/1920) (51.0) (29.0) (72.0) (41.0) Total 53465 24476 26427 2561

(46) (49) (5)

Source: CSO, Annual Survey of Industries, 'Summary Results of Factory Sector' (Various Issues), New Delhi.

Note: numbers in parenthesis shows the percentages to total workers *- for all India level the data is based on four-digit classification and is only for tanning and dressing of leather but for Tamil Nadu the data is based on three digit classification which includes both tanning and dressing of leather, manufacture of luggage handbags. saddlery & harness

Table 3.17 shows that out of the total number of workers employed in Tamil Nadu

leather industry, 51 percent of workers employed in leather footwear and the

remaining workers are employed in the leather tanning and leather goods sector. The

gender wise distribution of workers reveals that out of the total number of workers in

Tamil Nadu, 49 percent of them are women workers and 46 percent of them are male

workers. The leather footwear industry is not only a major employer of workers, but it

is also a major employer of women workers (73 percent).

90

Leather Industry in India and Tamil Nadu-Macro Level Trend5

Table 3.18 Tamil Nadu Leather Industry (l) - - :!l - .. i=' - _ ..... .. C ~ [I'J " ::; <.I

::I - '" COO " " '" '0;; - " . ;:: Q., :; ~ c._ c. .. c. ....

;;<t: :::I .~ c .. ~ "'" .. "",00 ~;~ Co - '-.- -" c. .. ::I " .. ::I .. '" ~ ~ rn " - '" .. =;;. - c.~ "<.I~ .... o .:0: c. o " '" -c: _ e "'" '" " '" =-~ ~ '" oe ...... - ~.!:t: .~ "0 t .~ " .- Z o c. '" -"

, 00= ~ ~ os: ;:.. - ~

" '" <.I il-o .. .. "'.:0: .. ZlU '"'iIi~- ell "'0 .- ...l <:) ::: ~ " o c. " .. c. " .. c. " .. = :... i:

== .- - .... " " .. , ::I ::I " ::I 0 C.

'" ::I ~ '0 C. - - " .,. .. _.:0: - ..

6 ~ <.I "'" ~ > c. B > " ~ ~ '" ~ '" c. ;;. >- >

~

1974-75 2.1 3.3 26 94674 0 12358 0 1976-77 2.6 2.9 27 57 128301 225090 14028 24611

1977-78 3.8 3 30 59 122033 206836 12463 21124

1978-79 4.2 2.9 31 68 137372 202018 12966 19068

1979-80 4 2.5 33 87 198550 228218 14856 17076

1980-81 3.9 3.5 33 93 139467 149965 14663 15767

1981-82 4.1 4 42 100 138856 138856 13124 13124

1982-83 3.6 4.1 38 109 151388 138888 16386 15033

1983-84 2.6 4.4 27 118 154570 130992 25026 21208

1984-85 2.7 4.3 32 126 157025 124623 20822 16525 1985-86 3.1 4.1 36 135 175788 130213 20079 14873

1986-87 3.2 4.5 39 144 188434 130857 21733 15092

1987-88 2.9 4 35 153 224861 146968 26036 17017 1988-89 2.9 4.1 34 167 225809 135215 27786 16638

1989-90 2.8 4.4 34 217 223771 103120 28807 13275

1990-91 2.8 4.4 35 257 220810 85918 28315 11018

1991-92 2.2 4.5 26 299 314564 105205 54677 18287 1992-93 2.6 4.3 26 348 352575 101315 57961 16655

1993-94 1.7 3.5 16 353 444165 125826 100984 28607 1994-95 3.5 4 31 407 444550 109226 57365 14095

1995-96 3.4 4.1 27 409 469616 114821 71518 17486 1996-97 3.3 3.9 28 430 512665 119224 71398 16604 1997-98 3.8 3.9 33 503 676719 134537 78603 15627 1998-99 2.9 NA 27 467 NA NA 66016 14136 1999-00 2.6 NA 19 325 NA NA 90129 27732 2000-01 4.3 NA 35 293 NA NA 71327 24344

Source: value added per worker and value of output at current prices is from CSO, Annual Survey of Industries, 'Summary Results of Factory Sector' (Various Issues), New Delhi.

Note: *- The data for 76-77 is not available and is not calculated and for other years wc estimated based on the trend of the series. IC is invested capital, VA is value added; WPI-LP is wholesale price index for leather and leather products.

NA- Not Available

The all India trend is reflected in Tamil Nadu industry, which shows that it is a low

capital-intensive sector. But the capital intensity increased from 2.1 percent in 1974-

91

Leather InduslIY in India and Tamil Nadu·Macro Level Trend,

75 to 4.3 percent in 2000·2001. Tamil Nadu leather industries are known for very

highly modernized and mechanized.

In the case of Tamil Nadu the share of wages in value of output and value added

shows a different picture compared to the all India level. The share of wages in value

of output has increased slightly from 3 percent in 1974·75 to 3.9 percent in 1997·98.

Likewise the share of wages in value added increased from 26 percent in 1974·75 to

35 percent in 2000-2001. There is no steady increase and there is wide fluctuation.

However, in 1999·2000, the sharc ofwagcs in valuc added is drastically reduced tol9

percent and there is a sudden increase to 35 percent in 2000·2001.

Table 3.19 Tamil Nadu Leather Industry (2)

Total Annual CPI-IW-

RAAWat Index no

Year workers

average TN 82 82 prices

RAAW wage (Rs.) prices 1974=100

1974-75' 11960 3161 62 5098 100

1976-77 13929 3812 61 6249 123

1977·n 14587 3757 66 5692 112

1978·79' 16119 4070 68 5985 117

1979-80 18276 4875 73 6678 131

1980·8 I 19069 4819 83 5806 114

1981-82 21518 5535 95 5826 I 14

1982-83 20707 6244 100 6244 122

1983·84 21534 6780 117 5795 114

1984·85 27283 6674 127 5255 103 1985·86 27197 7243 134 5405 106 1986-87 27424 8471 144 5883 115

1987·88 31141 9149 156 5865 115

1988·89 38285 9401 169 5563 109

1989-90 45205 9809 173 5670 111

1990-91 * 4121 I 9781 185 5287 104

1991-92 52342 14186 207 6853 134

1992-93 52666 15260 236 6466 127 1993-94 57321 15732 253 6218 122

1994-95 60894 17908 286 6262 123 1995-96 58405 19207 321 5983 117

1996-97 58675 20036 349 5741 113 1997·98 47975 26087 375 6957 136

1998·99 62583 17899 407 4398 86 1999-2000 63329 17385 427 4071 80

2000·2001 53465 24695 449 5500 108 ,

Source: Total workers and wages from CSO, Annual Survey of 1ndustnes, 'Summary Rcsu1ts of Factory Sector' (Various Issucs), New Delhi.

92

Leather indu.wy in india and Tamil Nadll-Macro Level Trend~

Note: *- The data for 76-77 is not available and is not calculated and for other years we estimated based on the trend of the series. CPI-IW-TN is Consumer Price Index for Industrial Workers for Tamil Nadu and RAA W is Real Annual Average Wage.

Table 3.20 Annual Compound Growth Rate in Tamil Nadu Leather Industry (1974-75 to 2000-2001)

Variables Compound Growth Rate (%)

1974-75 to 1974-75 to 1981-82 to 1990-91 to 2000-2001 1980-81 1989-90 2000-01

Value added per worker at 22.9 7.3 2004 15.1 current prices Value added per worker at 0.4 -28.4 -0.7 8.9 1981 prices (labour Productivity) Value of output per worker 18.8 24.8 16.8 35.7 at current prices Value of output per worker -7.3 -17.4 -3.9 11.6 at 1981 prices Money wage rate 41.3 50.1 46.3 21.4 Employment 17.1 23.8 23.8 4.7 Annual average real wage -0.7 6.0 -1.3 -6.3 rate at 1982

Note: *- significant at I percent level, **- significant at 5 percent level and *** -significant 10 percent level.

Over the period of 1974-200 I, all the variables shows a significant growth rate except

value of output per worker at 1981 prices (labour productivity) and the real wages.

The Labour productivity shows less than one percent growth but is statistically

insignificant. Likewise, the real wage rate shows a very low growth rate of less than

one percent but is statistically insignificant. The study analysed the growth rate in

three different sub periods.

Between 1974 and 1981, labour productivity, which is measured by value added per

worker at 1981 prices and value of output per worker at 1981 prices, shows a negative

growth rate. The other variables like money wages and employment registered a

growth rate of 50 percent and 24 percent respectively. Rcal wage rate shows a growth

ratc of 6 percent but is not statistically significant.

During the 1980s the money wages declined and employment registered a same

growth rate of 24 perc en!. In the 1980s real wage rate registered a negative growth

rate. The value added per worker and value of output per worker at 1981 prices

registered a significant growth rate since the 1980s.

93


During the 1990s the value added per worker at current prices, value of output per

worker at current and constant prices shows significant growth rate, However, labour

productivity shows a drastic an increase of 8.9 percent in the 1990s but statistically

insignilicant. The nineties trend in the Indian leather industry is reflected in the Tamil

Nadu leather industry. The growth of money wage rate declined to 21 percent whereas

it was 46 percent in I 980s. Likewise the growth of employment drastically declined to

5 perCetlt whercas it was 24 percent in the 1980s. The real wage rate continued to

show a negative growth rate.

Thus the performance of the Tamil Nadu leather industry is not favourable to the

workers because the employment and real wages are lagging way behind labour

productivity. It also shows the less bargaining power oflhe organized sector workers.

Section 6

3.6 Conclusion

This chapter focused on two aspects of the Indian leather industry. One, export trends

in Indian leather industry and two, growth of employment, money wages, real wages

and labour productivity in India and in the Tamil Nadu leather industry .

.,. The Indian leather industry has great potential for exports and employment

generation. Export trends in Indian leather industry, show how the Indian

Government has initiated progressive economic policies to facilitate the

development of the leather industry. It is reflected in the growth of exports over

the period of 1972 to 2005 .

.,. Before 1970s, India exported mainly raw hides and skins. The Government set up

various committees for the diversification and modernisation of the Indian leather

industry. The policy changes facilitated the Indian leather industry to shift from

the export of raw hides and skins as well as semi-finished leather to high value

added finished products .

.,. Since the 1970s, the export of leather and leather products are significantly

increasing but there are wide fluctuations. From 2000-200 I to 2004-2005, the

value of exports drastically increased with slight decline in 2002-2003.

94

Leather Industl)' in India and Tamil Nadu-A1acro Level Trends

..., The value ofleather and leather product exports reveals that it is one of the major

sources of foreign exchange earnings for the country. Another important feature is

that the footwear sector has the highest share in the value of exports among leather

and leather exports .

..., In terms of capital intensity, employment, labour productivity and other related

factors, the Indian leather industry shows different picture. The Indian leather

industry is a low capital-intensive sector and it is one of the low wage industries.

The share of wages in value added has reduced from 39 percent in 1974-75 to 21

percent in 1999-2000.

" At the all India level, over the period 1974-75 to 1999-2000, employment, money

wages, value added per worker at current prices. value added per worker at 1981

prices shows a significant increasing trend. However, the real wage rate recorded

a very low growth rate ofless than I percent, but is statistically insignificant.

" The study analysed the trend in these variables in three different sub periods

(1974-75 to 1979-80, 1980-81 to 1989-90 and 1990-91 to 1999-2000). During the

1970s at all India level, all the variables, value added per worker at current prices,

employment, money wage rate, real wage rate showed a significant growth rate

except labour productivity that is value added per worker at 1981 prices. This

perhaps could be a trade off between the growth of employment and the

productivity front.

" However, there was a reversal of trend during subsequent decades. Since the

1980s all the variables except value added per worker at current prices and 1981

prices showed a significant declining gro\\1h rate. The growth of real wage rate

showed a negative growth rate since 1980s. This indicates that since the eighties

were the period was unfavorable to the workers in terms of growth of

employment, money wage rate and real wage rate. The negative growth of real

wage rate indicates the less bargaining power of the workers .

..., Among the three groups of the leather industry, the leather footwear sector is

highest employer of workers. Over the years the leather goods sector shows a

better performance than the leather tanning and footwear sector in terms of labour

productivity, real wages and employment. But the share of wages in value added

95

Leather Industry in India and Tamil Nadu-Macro Level 7i"en(h

and value of output is reduced in all the three sectors. Since 1980s in all the three

sectors. the lahour productivity, the employment and real wages shows a decline

except real wages in leather goods sector which has increased since the I 990s.

>- Like the Indian leather industry, the Tamil Nadu leather industry is a low capital

intensive sector. But in the Tamil Nadu leather industry, the capital illtensity

increased slightly from 2.1 percent in 1974-75 to 4.3 percent in 2000-2001.

However, it shows a slightly different trend in terms of share of wages in value

added and value of output. The share of wages in value of output increased from

3.3 percent in 1974-75 to 3.9 percent in 2000-2001. Likewise share ofwuges in

value added increased from 26 percent in 1974-75 to 35 percent in 2000-2001.

>- In Tamil Nadu leather industry, over the period of 1974-75 to 2000-2001 all the

variables showed a significant growth rate except value of output per worker at

1981 prices and the real wages. The value of output per worker at 81 prices

showed less than one percent growth but statistically insignificant. Likewise, the

real wage rate showed a very low growth rate of less than one percent but this is

statistically insignificant.

>- In the Tamil Nadu leather industry, during the 1970s the employment, money

wage rate and real wage rate had a significant growth rate, whereas the value of

output per worker at 1981 prices and value added per worker at 1981 prices

recorded a negative growth rate. Since the 1980s the growth of employment,

money wage rate and real wage rate showed a drastic decline. In the organised

sector of Tamil Nadu leather industry, the employment and real wages are lagging

way behind the labour productivity. It reflects the trend in the Indian leather

industry that of less bargaining power of the organized sector workers.

To summarize, on the one hand, export is booming in the Indian leather industry. On

the other side, there is decelerating employment growth and negative real wage rate

that explains the poor bargaining power of the workers. This implies that it generates

employment but the quality of employment is compromised for the growth of exports.

96

chapter 3 the leather industry in india and tamil nadu...

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