After achieving a handsome growth of about 17 per cent during April-August period, exports have started shrinking as the economic situation in the US and Europe has deteriorated since September.

Leather and leather products' exports were $1.6 billion up to August this fiscal against $1.44 billion in the same period last year. However, the exports saw turning of the tide since beginning of the second half of the current fiscal.

"Exports were down 15 per cent in November and 20 per cent in December," Council for leather exports chairman Mukhtarul Amin said.

Amin said between 3.5 lakh to five lakh people lost jobs since September and another five lakh would be out of work in the next four-five months.

Bulk of Indian leather and leather products go to the European markets, which are going through challenging times and demand for products like finished leather, footwear, garments, saddlery and harness has dwindled, Amin said.

Exporters are facing order cancellations while several buyers have asked suppliers to hold shipments.  He said the demand for finished leather exports has dropped by 50 per cent in the last three months.

Leading international brands like Pierre Cardin, Versace and Tommy Hilfiger outsource their products to India.

Faced with credit freeze in Europe and the US, the industry is exploring alternate markets in Latin America, Eastern Europe and the Middle East, Amin said.