US Tariffs May Shrink India’s Leather Industry Revenue by 10-12%: Crisil Ratings

New Delhi, Oct 23 (KNN) India’s leather and allied products industry could see a revenue decline of 10–12% in FY26 due to steep US tariffs, according to Crisil Ratings. 

The United States has imposed a 50% duty — comprising a 25% reciprocal tariff and an additional 25% penalty linked to India’s Russian oil imports — on Indian goods, sharply denting export demand.

Crisil noted that despite moderate domestic recovery following GST rationalisation, lower taxes, benign inflation, and stable interest rates, export dependence remains a major challenge. Operating profit margins are expected to fall by 150–200 basis points, weakening the credit profiles of many players.

The agency analysed 34 firms accounting for 12.5% of the industry’s Rs 56,000 crore revenue in FY25, with exports contributing 70%. The European Union and the US were the top markets, together making up over 70% of total exports. 

The latest tariffs, effective from August 27, 2025, have placed Indian exporters at a disadvantage compared to countries like Vietnam, Italy, Cambodia, and France, where US tariffs are lower.

“With loss of orders from the US, export volumes are expected to drop 13–14% this fiscal,” said Jayashree Nandakumar, Director at Crisil Ratings. Many small tanneries and leather manufacturing units have shut operations after the tariffs took effect, while others are exploring new markets or outsourcing production — measures that may take time to yield results.

However, the recently signed India–UK Free Trade Agreement and strong demand from non-US markets may cushion the blow. 

Domestically, the GST cut from 18% to 12% on leather products and lower interest rates are expected to support demand, though falling export orders could continue to weigh on the sector.

(KNN Bureau)