Global crisis, environmental volatility and expansion of the Indian leather industry

Abstract

Indian leather industry has massive potential for generating employment and achieving high export-oriented growth. However, the on-going global economic slowdown and the wide erratic behaviour of the overall weather condition particularly in the Europe pose both threat (of market loss) and opportunity (to gain some unanticipated demand in the market) before it. On the other hand, its economic performance has not been assessed much till date. The present paper attempts to fill in this gap and makes some suggestions regarding the expansion of the industry by examining technical efficiency (TE) of individual leather producing firms for some selected years since the early-1980s. Analysing the industry’s firm-level data through the Data Envelopment Analysis the paper observes a significant positive association between a firm’s size and its TE, but no such conclusive relation between a firm’s age and TE. It also finds significant variation in TE across firms in different groups of states as well as under different organisational structures. Although, non-availability of panel data does not allow one to assess the trend of the performance of the Indian leather firms properly, the average firm-level TE, however, seems to be on an increasing path, except for downswing in some years. On a totality, analysing the relevant supply side factors the paper proposes the policy makers to go forward in expanding the industry particularly keeping India’s severe unemployment problem, of both skilled as well as unskilled labour forces, in mind. Key Words: Leather industry; Data Envelopment Analysis, Technical Efficiency, Scale Efficiency, Returns to Scale. JEL Classification No: D24, L67, R38.