India’s footwear industry is losing ground in global trade as competitors like Vietnam and Indonesia expand their market share through targeted policy reforms, free trade agreements, and export-led growth, according to a new report by Icra Limited. Despite being the world’s second-largest footwear producer after China, India’s export growth has been tepid at around 3 per cent annually since FY2016, with little progress in competitiveness, innovation, or supply chain efficiency.

Icra’s report titled “India’s Missed Steps and the Path Forward” highlights that global footwear production reached nearly 24 billion pairs in calendar year 2024, with Asia remaining both the production and consumption hub. China continued to dominate global output with a 55–58 per cent share, followed by India at 8–10 per cent, Vietnam at 5–8 per cent, and Indonesia at 5–6 per cent. Yet, in terms of exports, India’s share has remained stagnant at around 1.8–1.9 per cent, while Vietnam and Indonesia have steadily grown since 2021, driven by favourable trade policies and foreign investment.

Vietnam and Indonesia have successfully leveraged free trade agreements with major markets, including the United States, the European Union, and the United Kingdom. In contrast, India continues to face tariff disadvantages in the same geographies. The report notes that while Vietnam has secured duty-free access under pacts such as the EU–Vietnam FTA and UK–Vietnam FTA, and Indonesia recently signed an EU trade agreement, India’s footwear exports remain hindered by the absence of such preferential access.

Icra attributes India’s weak export performance to a fragmented industry structure, heavy reliance on imported raw materials, and compliance challenges such as Bureau of Indian Standards (BIS) certification requirements that delay shipments and add costs. Around 70 per cent of the sector remains unorganised, and a significant credit gap limits investment in modernisation, the report says. Global buyers are demanding 20–25 per cent price discounts from Indian exporters due to rising input costs and competition from cheaper suppliers.

The report warns that India’s footwear sector could face further headwinds from potential US tariffs of up to 50 per cent on non-leather footwear — a category that forms nearly 90 per cent of domestic production. Meanwhile, new players like Bangladesh are emerging as competitive exporters, particularly in synthetic and non-leather categories.

To restore competitiveness, Icra recommends that the government expand Free Trade Agreements to secure market access, introduce a Production Linked Incentive (PLI) scheme for footwear components, and tailor export refund mechanisms such as RoDTEP to benefit footwear manufacturers. It also calls for the creation of common testing and design facilities, the development of manufacturing hubs, and the staged rollout of quality control orders to reduce disruptions for smaller producers.

The agency further highlights the need to build domestic capacity for critical inputs like EVA granules, TPU films, and adhesives, which are currently imported, to reduce costs and dependency. Establishing dedicated research and development units for design innovation and industry–academia collaboration will also be vital, it said.

“India’s footwear exports have remained largely flat over the past decade, while global competitors have surged ahead by aligning policy incentives with manufacturing scale and trade access,” Icra said in the report. “Bridging these structural and policy gaps will be crucial if India is to convert its production strength into export leadership.”

Source: Business World