The country's shoe making units in Tamil Nadu and Uttar Pradesh are abuzz with activity. European shoe makers, who were sourcing from China, have now turned to India. Indian units have started getting enquiries and orders from European companies, some of whom have also announced setting up their own manufacturing facility in the country.
According to industry representatives, Chinese products, which used to be cheaper by around 10 per cent compared to Indian products, are no longer cheaper due to the increase in labour costs in China. The costs of labour have risen by around 40 per cent since January 2008 in China. Implementation of the European Union anti-dumping duty and Chinese currency Yuan appreciating against the US dollar are the other stated reasons.
This tilt towards India is already reflecting. According to statistics for the first seven months of the current year, European imports of footwear from China fell by 1.7 per cent compared to the same period last year, whereas from India, it rose by 3.5 per cent.
During 2007-08, footwear exports from India was valued at $1,475 million (around Rs 7,300 crore or Rs 73 billion) compared to $1,236.91 million (around Rs 6,150 crore or Rs 61.50 billion) in the same period last year, an increase of 19 per cent.
Some of the footwear majors now looking at India include Nike, Addidas and Puma, which are expected to route parts of their production and purchase out from China to India.
Growth-Link Overseas, the Hong Kong-based subsidiary of Taiwanese sports shoe major Feng Tay Enterprise, is planning to invest around Rs 300 crore (Rs 3 billion) for setting up a manufacturing facility in 275 acres at the Cheyyar Industrial Complex in Tamil Nadu to make Nike footwear. The unit will produce 1 million pairs of footwear every year.
A recent report quoted Herbert Hainer, president, Adidas, saying that as the wage level in China was increasing, the firm plans to transfer part of its manufacture and purchase from China to other countries.
The report added the company had sent its representatives to South East Asian countries including India, where prospects are high.
At present, around 50 per cent of Adidas' products are made in China and the company has 264 factories across the country.
Another of Europe's leading shoe brand Fly Flot is also planning to set up a manufacturing plant in India along with Mauritius-based Pavers Foresight Smart Ventures. The new plant is coming up in Tamil Nadu and will produce 1 million pairs in the first phase, with the possibility of raising this to 2 million pairs by 2012.
According to a representative of an Italy-based company, labour costs increased by 40 per cent to an average of $160 (around Rs 8,000) a month. But, in India, it is around Rs 3,500 to Rs 4,000. He noted a recent survey by the China Leather Industry Association estimates labour costs will increase by another 20 per cent.