comparative advantage of saddlery/deteregent industry in kanpur

Comparative Advantage Of

Saddlery with respect to Aradhya

InternationalBy:HIMANI SHUKLANEHA TANDONUPKAR TIWARIABHI JAISWAL

Comparative AdvantageThe theory of comparative advantage is an economic

theory about the work gains from trade for individuals, firms, or nations that arise from differences in their factor endowments or technological progress. 

In an economic model, an agent has a comparative advantage over another in producing a particular good if they can produce that good at a lower relative opportunity cost or autarky price, i.e. at a lower relative marginal cost prior to trade.

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One does not compare the monetary costs of production or even the resource costs (labor needed per unit of output) of production. Instead, one must compare the opportunity costs of producing goods across countries.

The closely related law or principle of comparative advantage holds that under free trade, an agent will produce more of and consume less of a good for which they have a comparative advantage.

Indian Saddlery IndustryIndia is one of the largest producers of saddlery and

harness goods in the world.

The saddlery industry was established in the 19th century primarily to cater to the needs of military and police.

From then on, initiatives were taken to develop the industry and today there are over 150 units in the organised sector, out of which approximately 105 are 100% export oriented units.

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• The Saddlery industry occupies a place of prominence in the Indian economy in view of its substantial export earnings and growth.

• India's leather industry has witnessed robust growth in recent years .

• Almost 50 per cent of India's leather business comes

from international trade.

• The major markets for Indian leather products are Germany, the US, the UK, Italy, France, Hong Kong, Spain, the Netherlands and UAE.

Percentage share of leather and leather products (2015-2016)

Percentage share of various countries in India’s leather and leather products

exports (2015-2016)

Kanpur, the leather hub of IndiaKanpur, in the state of Uttar Pradesh, is a major production

centre for saddlery goods in India accounting for more than 95% of the total exports of saddlery items from India.

Because of its specialisation in tanning and finishing of buffalo

hides, Kanpur is the only centre in the country where harness leather, which is major input for saddlery industry, is manufactured.

The export of saddlery and harness items have showed an annual growth rate of about 40% reaching DM 64 million during 1998-99

Company Profile:Nature of business- manufacturersProducts manufacturers- Breeches, Halter, Rugs, ridding

boots, Pads, saddle pads.Year established- 2009Owner- Mr. Ashwini SrivastavaAddress- No. 22-M-7, Dabauli, Ratan lal nagar, Kanpur -

208023, Uttar Pradesh, India.

Aradhya International

Saddlery industries come under monopolistic competition

Monopolistic Competition• Monopolistic competition is a type of imperfect competition

such that many producers sell products that are differentiated from one another (e.g. by branding or quality)

• In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms.

• In the presence of coercive government, monopolistic competition will fall into government-granted monopoly. Unlike perfect competition, the firm maintains spare capacity.

Short-run equilibrium of the firm under monopolistic competition. The firm maximizes its profits and produces a quantity where the firm's marginal revenue (MR) is equal to its marginal cost (MC). The firm is able to collect a price based on the average revenue (AR) curve. The difference between the firm's average revenue and average cost, multiplied by the quantity sold (Qs), gives the total profit.

Long-run equilibrium of the firm under monopolistic competition. The firm still produces where marginal cost and marginal revenue are equal; however, the demand curve (and AR) has shifted as other firms entered the market and increased competition. The firm no longer sells its goods above average cost and can no longer claim an economic profit

Leather industry has an advantage in Kanpur because...

Cheap raw material availability

Easy availability of water resources

Presence of slaughterhouse

THANKS