The core tension: structural improvement, output-index weakness
Leather and Related Products is the smallest sector by output in this ten-sector series, ₹73,631 crore of Gross Value of Output (GVO) in 2023-24, against ₹7.81 lakh crore for Textiles and far larger figures for Electronics or Chemicals. But scale aside, several structural indicators point in a positive direction. The value-added share of output rose from 17.9% (2014-15) to 23.8% (2023-24), a rising rather than falling trend, unlike Electronics, Chemicals, Metals or Food and Agro over the same period. Market concentration, measured by the Herfindahl-Hirschman Index (HHI), remains comfortably inside the 'Competitive' band throughout the decade (HHI 333.5 in 2014-15 to 544.4 in 2024-25), though it has drifted mildly upward rather than down, alongside a shrinking reporting base (97 firms in 2014-15 to 79 in 2024-25).
Set against that, the Index of Industrial Production (IIP) tells a weaker story than for any other sector reviewed. The index peaked at 125.0 in 2018-19, was already declining before COVID, fell to 100.6 in the COVID year, and has kept falling in four of the five years since, reaching 87.9 by 2025-26, below its own COVID-year trough. The sector ranks last of the ten on index level, latest-year growth and full-period compound annual growth rate (CAGR) alike. Firm-level financial ratios have not collapsed alongside this: profit after tax (PAT) margin and return on equity (ROE) both remain positive and broadly stable. But the output-volume story the IIP tells is clearly the sector's weakest data point.
Trade: a bright spot
Unlike the IIP series, trade tells a steady, positive story. Leather ran a trade surplus of ₹33,792 crore in FY24-25 (exports ₹47,172 crore against imports ₹13,380 crore), and that surplus has held in a broadly similar ₹27,000-38,000 crore range in every year since the COVID-year trough. Exports grew 5.8% year-on-year in FY24-25 against essentially flat imports (0.1% growth), and import dependency, at 22.1%, sits well below several other sectors in this series. Footwear (ankle-covered footwear, other rubber/plastic-soled footwear) and leather goods (handbags, apparel) dominate both the export and import product lists, with the specific top products differing meaningfully between the two directions. On partner countries, the USA (₹10,568 crore), Germany (₹5,106 crore) and the UK (₹4,198 crore) are the top three export destinations, while China (₹4,481 crore) dominates the import side by a wide margin over the next-largest partner.
Investment: private-led, and PLI-free
Investment in Leather is small in absolute terms, ₹19,446 crore outstanding across 31 projects, against ₹87,372 crore for Textiles, but is entirely funded by Indian and foreign private capital; the 2024-25 ownership breakdown shows zero Central or State Government new investment. A distinguishing feature of this sector, not shared by Textiles, Electronics, Automotive and Transport Equipment, Metals, Electrical Equipment, Food and Agro or the pharmaceuticals slice of Chemicals, is that Leather and footwear is not one of the Government of India's 14 officially designated Production Linked Incentive (PLI) sectors. Only Engineering Goods and Construction Materials are similarly outside the PLI framework. CMIE Industry Outlook carries no PLI figures for this sector, and a supplementary CMIE PLI report shows only a token ₹0.1 million (₹1 lakh) Budget Estimate line for 2024-25 and 2026-27, an administrative-scale figure rather than a substantive scheme allocation. Investment here, in other words, is close to a pure private-capital signal, unclouded by a policy incentive layer that shapes the investment story in most of the other sectors reviewed.
Geography: Tamil Nadu and Uttar Pradesh together account for half the sector
Tamil Nadu (25.2% of national GVO) and Uttar Pradesh (24.0%) together account for roughly half of national output, with Haryana (15.5%), West Bengal (9.9%) and Karnataka (5.5%) rounding out a top-5 that covers about 80% of national GVO, a tighter geographic concentration than most sectors in this series. Karnataka is the notable outlier on wages, the highest wages per worker among the top-5 states (₹2,49,979) despite having the smallest factory count and GVO share among them, a pattern of fewer, higher-value operations rather than high-volume, high-employment manufacturing.
R&D: a laggard, even by the standards of this series
R&D spend as a share of sales stayed under 0.06% throughout the decade, among the lowest R&D intensities of any sector in this series, and squarely in the 'laggard' band (below 1%) by the Institute's own thresholds. The small uptick to 0.053% in 2024-25 is driven by a single year's R&D spend rising more than seven-fold from a very low base and reads as a possible one-off rather than an established trend. Unlike Textiles or Electronics, there is no PLI scheme to set against this R&D figure.
Explore the sector: interactive mindmap
Leather and Related Products is the smallest sector in this series by output, and its official output index is the weakest, last of ten on level, growth and CAGR, having fallen below its own COVID-year trough by 2025-26. But nearly every other structural indicator points the other way: value-added share of output is rising, market concentration remains firmly in the competitive band even as it drifts mildly upward, and the sector runs a healthy, steady trade surplus with low import dependency. It is also one of only three sectors in this series, with Engineering Goods and Construction Materials, that has no Production Linked Incentive scheme at all, making its investment pipeline a comparatively unclouded private-capital signal.
References
Methodological Notes
Institute of Manufacturing and Economy · Sector Snapshots · August 2026 · NIC Division 15 · Primary research and compilation: Riddhi Bhargava
Author's Profile
Riddhi Bhargava is an analyst at the Institute of Manufacturing and Economy. She conducted the primary research for this sector snapshot and compiled the Sector Snapshots series.