India’s Toy Industry : Growth and Challenges
The Indian toy industry has been making significant strides in recent years, with an estimated value of approximately 5 billion USD. However, this only represents a small portion of the global toy market, which is worth around 120 billion USD. Toy manufacturers in India concentrate mainly in regions such as NCR, Maharashtra, Karnataka, Tamil Nadu, and various clusters across central Indian states. Despite its potential, the sector remains fragmented, with 90 percent of the market lacking organization. Additionally, there are approximately 4,000 toy industry units from the MSMEs, further adding to the diversity of the industry. However, analysts project that the domestic toy demand will experience a growth rate of 10-15%, surpassing the global average of 5%.
Background and Recent Developments:
In the period between 2018-19 and 2021-22, India witnessed a significant increase in toy exports from ₹812 crore to ₹1,237 crore. However imports declined from ₹2,593 crore to ₹819 crore, according to official data. The boost in toy exports can be attributed to initiatives like “Make In India” launched in 2014, which aimed to promote domestic manufacturing. The Prime Minister also highlighted the importance of toy manufacturing in the “Mann ki Baat” program in 2020.
Overview of India’s Toy Industry:
In 2015-16, the toy industry consisted of approximately 15,000 enterprises or establishments, producing toys valued at ₹1,688 crore. These enterprises employed 35,000 workers and utilized a fixed capital of ₹626 crore. Registered factories, employing 10 or more workers on a regular basis, accounted for 1% of the total number of factories. Despite their small number, these factories employed 20% of the workers, utilized 63% of fixed capital, and produced 77% of the value of output. However, between 2000 and 2016, the industry experienced a decline in output and job losses. Imports accounted for up to 80% of domestic toy sales until recently, and between 2000 and 2018-19, imports grew at a much faster rate compared to exports. India’s share in the global toy trade stood at a mere half-a-percentage point, and the industry witnessed negative productivity growth between 2014 and 2019.
Reasons for Recent Turnaround and Challenges Faced:
In the past three years, there has been a notable change in the toy trade, with a contraction in imports. This can be attributed to the increase in the basic customs duty on toys from 20% to 60% in February 2020, as well as the imposition of non-tariff barriers such as production registration orders and safety regulation codes. However, historically, India’s toy industry has lagged behind other Asian countries like Japan, China, and Vietnam, which have successfully promoted toy exports for job creation. India’s inward-oriented industrial policy during the Planning-era protected domestic production but hindered the growth of the industry. The sector remained stagnant, fragmented, and failed to keep pace with imports of modern, safe, and branded toys.
Government Initiatives to Boost Domestic Production:
To increase domestic production and reduce toy imports, the Indian government has taken several measures.
- The Directorate General of Foreign Trade (DGFT) mandates sample testing of each toy consignment.
- The Indian government has increased the basic customs duty (BCD) on toys.
- Integration of subjects like Maths, Science, and History into toy product development and production.
- Compulsory certification of toys under the Bureau of Indian Standards (BIS).
- The Ministry of Education organized Toycathon 21 to crowd-source solutions for challenges faced by the toy industry.
- The Scheme of Fund for Regeneration of Traditional Industries (SFURTI) by the Ministry of Micro, Small & Medium Enterprises (MSME) has approved 19 toy clusters.
Looking Ahead:
While the recent increase in toy exports is encouraging, it is crucial to recognize that this growth is limited to just two years, coinciding with the COVID-19 pandemic. Sustaining this level of exports poses challenges due to the industry’s lack of significant investments in production and exports. The surge in toy exports appears to be driven by protective measures and exceptional circumstances, rather than sustained growth. The reservation policy and its subsequent abolition had no lasting positive impact on the industry. To foster the growth and success of the toy industry, policymakers should adopt comprehensive approaches that consider the specific conditions of industrial locations and clusters when formulating policies and institutions.
Conclusion:
The Indian toy industry is making progress, but it still faces significant challenges. The recent increase in toy exports is promising, but its sustainability needs to be closely monitored. To ensure long-term growth, the industry requires substantial investment, streamlined policies, and a focus on improving productivity. By addressing these issues and leveraging the government’s initiatives, India has the potential to become a major player in the global toy market, creating jobs and boosting the economy in the process.
