If one had walked into a toy store in India a few years ago, there would be an 80 percent chance they would be laying their hands on a ‘Made in China’ product. This is because the Indian market was flooded with imported toys, with eight out of 10 toys sold being predominantly imported from China. Even though the Indian toy industry boasts a rich heritage, Indian manufactured toys contributed to just 20 percent of the domestic market.
At Rs 328 crore and Rs 1,936 crore respectively, the import of toys was six times more than the export in 2014-15. The industry was languishing due to a lack of investment and technology, and competition from cheap imports. Traditional toys had long been forgotten, and local industry was fragmented.
Even though the industry had recorded double-digit growth in 2014-15, around 40 percent of Indian toy manufacturing units had closed down, and another 20 percent were on the verge of closure. The ones remaining were either static, or their productivity levels were declining.
Then in the last three years, something changed. From being a net importer, the Indian toy industry turned into a net foreign exchange earner. India’s import of toys fell by 70 percent from $371 million in 2018-19 to $110 million in 2021-22, while exports rose by 61.4 percent, from $202 million to $326 million in the same period. In the quarter ending April-August 2022, the country’s toy export registered a 636 percent growth, over the same period in 2013!
State Of Play
COVID-19-induced supply disruptions in 2020 would have sent an industry that was largely dependent on imports for its survival to its grave had it not been for two key interventions by the Government of India.
First, in February 2020, the government increased basic customs duty from 20 percent to 60 percent. A year later, in January 2021, the government issued the Toys (Quality Control) Order, making it mandatory for all toy manufacturers, from India and overseas, to get BIS (Bureau of Indian Standards) certification for selling toys in India.
Combined, the two measures helped deter both cheap and high-quality imports, while allowing local manufacturing to flourish. Sending the right signal to India’s major markets like the United Kingdom, Germany, and the Netherlands vis-a-vis maintenance of international standards, longstanding public health concerns around Chinese toys — 67 percent of which had been found to be highly-toxic were also alleviated. The new BIS rules encouraged many toy importers to get into manufacturing, and turn exporters to markets in Africa and West Asia.
At the same time, with an aim to boost traditional toy-making, and integrate the manufacturing and production ecosystem of toys, 19 toy clusters were approved.
Toying With New Ideas
India’s protectionist push for the toy industry may have come at a time when the country was witnessing intense skirmishes with China, yet, given India’s vast export potential, the size of its domestic market (above 300 million children), and the employment potential of the toy industry, the ‘aatmanirbhar’ is a welcome one.
The measures taken so far are however a very small beginning in self-reliance, and if India wants to become a global player in toy manufacturing, building its image as a trustworthy destination for quality manufacturing may be a better way to move ahead, than just curbing imports.
The scope is immense. Given the right impetus, the Indian toy market has the potential to grow to $2-3 billion by 2024 (from $1.7 billion in 2017), and for every $100 million investment in the sector, 20,000 direct jobs, and another 8,000 indirect jobs can be created.
The Challenges
The toy industry is still highly fragmented, dominated by local producers (60 percent of India’s 4,000 toy manufacturers are unorganised), and lack innovation, and resources to invest in equipment and technology. Supply chains in the country are still highly fragmented.
To encourage competitiveness, the Centre could support the industry in setting up more clusters, subsidies on exports, and production-linked incentives for their manufacture, as well as toys to be incorporated in India’s Free Trade Agreements (FTAs). The Centre’s support in the form of incentives, as well as inputs on technology upgrade, can go a long way in helping the domestic industry grow swiftly.
Re-skilling the 7 million artisans in the country to help them meet the evolving demands of the industry while framing labour laws and regulations that protect workers’ rights can also help reap dividends.
Toy manufacturing is an ideal sector to revive a slowing economy. Solving for quality, skilling, and supply chain issues, the projected growth of the Indian toy industry looks imminent.