Context:
∙ As per the recent official 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.
Indian 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.
∙ The toy manufacturers in India are mostly located in NCR, Maharashtra, Karnataka, Tamil Nadu, and clusters across central Indian states.
How India became a net exporter?
∙ India followed an inward-oriented industrial policy in the Planning era, which sheltered domestic production by providing a ‘double protection’ — by import tariffs and reservation of the product for exclusive production in the small-scale sector — known as the ‘reservation policy’.
∙ Import Curb (Protectionism): Basic Customs Duty (BCD) on toys was increased from 20% to 60% in February 2020, and subsequently to 70% in Budget 2023.
∙ The Directorate General of Foreign Trade (DGFT) has mandated sample testing of each import consignment to curb the import of sub-standards toys.
∙ Quality Assurance: A Quality Control Order (QCO) for Toys was issued in 2020, with effect from 01.01.2021.
∙ Licensing: Special provisions were notified by Bureau of Indian Standards (BIS) to grant licences to micro sale units manufacturing toys without testing facility for one year and without establishing an in-house testing facility, which was further extended by three years.
∙ BIS has granted more than 1200 licences to domestic manufacturers and more than 30 licences to foreign manufacturers for manufacture of toys with BIS Standard Marks.
∙ ‘Make in India’ had a negligible effect on strengthening toy production and exports on a sustained basis.
∙ 100% FDI is allowed under the Automatic Route.
∙ 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.
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.
Conclusion
∙ The toy industry has turned net exporter since 2020-21. ‘Make in India’ policies with rising tariff and non-tariff barriers made it possible.
∙ Complementing protectionism requires the implementation of investment policies and the establishment of localized public infrastructure tailored to specific industries or clusters. This approach aims to create a positive cycle, fostering the growth of domestic capabilities to effectively contend with international competition.
