India’s revenues from the export of leather apparel and accessories, including bags, belts, and harnesses, may fall by seven to eight per cent in the fiscal year 2024.So says Crisil.

The decline in revenue is expected because of the slowdown in consumer demand in Europe and the United States, which are key markets for Indian exporters. Much of the leather apparel and accessories produced in the country are exported, with Europe and North America accounting for 75 per cent of orders.

Demand for discretionary goods in key export markets — essentially the advanced western economies — has been shrinking because of pinching inflation and rising recession fears.Though domestic demand for the leather apparels and accessories segment remains resilient, the overall sectoral revenue is seen declining in the medium term.

As costs remain high, operating margins of companies are expected to compress by 150 basis points this fiscal and will remain range bound at six per cent to 6.5 per cent over the medium term. Given the increased raw material cost, inventory holding has become costlier. Additionally, due to lower cash generation, the working capital requirement at the sector level will be 15 per cent to 20 per cent higher in the near term.