India’s leather and allied products industry is bracing for a tough year as revenues are projected to fall by 10-12% in the current fiscal following steep US tariffs, according to Crisil Ratings.
The United States has imposed a 50% tariff on Indian goods, combining a 25% reciprocal tariff and a 25% penalty for India’s purchase of Russian oil.
The move has sharply reduced export volumes and hit India’s leather exports hard.
Despite some positive domestic factors such as lower GST on leather goods, reduced income taxes, low inflation and cheaper interest rates, the heavy export dependence of the sector means these benefits are unlikely to offset the losses.
Operating profitability is expected to slide by 150-200 basis points, largely due to weaker exports.
Crisil Ratings, which studied 34 leather companies accounting for around 12.5% of the industry’s revenue, noted that the industry logged about Rs 50,000 crore (~USD 6 Billion) in FY2025, with exports making up 70% of total sales.
The European Union accounted for over half of India’s leather exports, while the US made up 22%. Early signs of a slowdown were evident when the US first introduced a 25% tariff in early August.
The additional 25% penalty, effective August 27, 2025, has further reduced India’s competitiveness compared to exporters from Cambodia, Vietnam and France, where tariffs range between 15% and 20%.
“With loss of orders from the US, the export volume is expected to drop 13-14% this fiscal. Revenue will be hit hard as the bulk of exports to the US is of finished leather products such as shoes and leather accessories, which fetch higher realisations.”
– Jayashree Nandakumar, Director, Crisil Ratings
Crisil noted that many US buyers have either cancelled or delayed their orders since the 50% tariff took effect. Smaller units, including tanneries and small leather products manufacturers with high US exposure, have been forced to shut down in recent months.
To cushion the impact, exporters are trying to diversify into other markets and explore outsourcing production to regions with lower duties. However, these measures are still in early stages and will take time to produce results.
The recently signed Free Trade Agreement (FTA) with the United Kingdom, along with stable demand from non-US markets, is expected to partly offset export losses.
On the domestic front, the GST cut on leather products from 18% to 12% is likely to boost sales and drive demand for premium goods. Tax incentives, low interest rates and stable inflation may further encourage consumption.
Falling export demand could push down raw material prices, offering some relief to manufacturers, but not enough to balance the impact of US tariffs.
India and the US have been in discussions since March 2025 for a bilateral trade agreement to find a fair and balanced solution.
The 50% tariffs officially came into effect on August 27 and talks are ongoing with the aim to conclude the first phase of the trade deal by October-November 2025.
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