India’s Toy Industry

India’s Toy Industry

News: According to recent Press release, the toy industry became a net exporter between FY 2014-15 and FY 2022-23. Its exports increased by 239% and imports declined by 52%, turning India into a net exporter.

About India’s Toy Industry:
• The Indian toy industry is among the fastest-growing globally, projected to reach $3Bn by 2028.
• Domestic market size currently stands at an estimated value of $1.5Bn. The sector is dominated by small & medium sized manufacturers.
• Labor-intensive toy categories like dolls, soft toys and board games offer significant manufacturing potential in India due to inherent cost competitiveness and growing demand. It is expanding its global presence, with increased high-value exports to Middle East and African countries.

How India became a net exporter?
• Rise in Protectionism: The turnaround in the toy trade since 2020-21 is attributed to rising protectionism. In February 2020, customs duty on toys was tripled from 20% to 60%. Non-tariff barriers, namely, quality control order (QCO), and mandatory sample testing of each import consignment were imposed since January 2021, restricting imports. The government further raised the basic customs duty to 70% in March 2023.
• Make in India Initiative: An unpublished case study by the Indian Institute of Management Lucknow (IIM-L), sponsored by the Department for Promotion of Industry and Internal Trade (DPIIT), reportedly credits the export success to various promotional efforts under the aegis of ‘Make in India’, initiated since October 2014.
• National Action Plan for Toys (NAPT): It has 21 specific action points, implemented by 14 Central Ministries/Departments, with DPIIT as the coordinating body. The Government is planning to provide comprehensive support to promote ‘Vocal for Local’ in toys through NAPT.
• COVID-19 Pandemic: The global supply chain disruptions during the COVID-19 pandemic times also adversely affected imports.

What are the associated challenges?
• High Cost: Small manufacturers are unable to upgrade to machinery production as taxes levy on the equipment is high.
• Regulation and Adhering to Standards: Many of them have struggled to keep up with the regulatory changes and adhere to BIS standards.
• Supply Shortage: The small-scale retailers face a shortage of supply, and unwillingly buy a lower-quality product. They depend on the bigger companies producing and supplying quality products.
• Unemployment: The output of the informal or unorganised sector shrank, though it continues to account for the majority of establishments and employment.
• India’s toy industry is minuscule and during the one-and-half decades between 2000 and 2016, industry output was halved in real terms (net of inflation) with job losses.