No child’s play: Are domestic manufacturers benefitting from India’s declining toy imports?

Ease of Doing Business for MSMEs: According to the available government data, the overall value of India’s toy imports had declined from $371 million in FY19 to $343 million in FY20 and $143 million till December 2020 along with dependence on China as a percentage of total imports that reduced from 90 per cent in FY18 to 76 per cent till December 2020.

In August last year, PM Narendra Modi in his monthly Mann ki Baat address had urged India to become a global toy production hub. (Image: pixabay)

Ease of Doing Business for MSMEs: Indian toy sector, which comprises 8,366 registered manufacturing MSMEs under the National Industrial Classification Code 2008, has been importing toys largely from China. However, a gradual decline in imports has been recorded in the past three years. According to the available government data, the overall value of India’s toy imports had declined from $371 million in FY19 to $343 million in FY20 and $143 million till December 2020 along with dependence on China as a percentage of total imports that reduced from 90 per cent in FY18 to 76 per cent till December 2020.

Experts cite measures adopted by the government over the past few years to promote domestic manufacturing has led to the contraction in imports. The prime beneficiaries have been small businesses here.

“Decline in imports is benefitting local small manufacturers with increased demand on the back of steps taken by the government. In my view, India might become a significant toy manufacturing hub in the world in the coming three-four years if the dip in imports continued. With the growth in manufacturing, it has also helped in employment as toy is a labour-intensive sector. We estimate that there are around 3 million people engaged in the sector. The overall manufacturing growth could be up to 25-30 per cent ahead,” Ajay Aggarwal, President, The Toy Association of India told Financial Express Online. Aggarwal also runs Ankit Toy Manufacturing Company making kitchen sets and toy building blocks. 

Importantly, the Directorate General of Foreign Trade in 2019 had mandated sample testing of each toy consignment and banned permission for sale unless the quality testing was successful to control the import of cheap and sub-standard toys. Moreover, in February last year, the government had also increased the Basic Custom Duty (BCD) on toys with HS Code-9503 from 20 per cent to 60 per cent. Toys under the 9503 code included doll carriages, tricycles, scooters, pedal cars and other wheeled toys, reduced-size scale models, and puzzles of all kinds.

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However, arguably the most important policy step taken by the government to restrict toy imports was the Toys (Quality Control) Order (QCO) through which toys were brought under compulsory Bureau of Indian Standards (BIS) certification with effect from January 1 this year. Nonetheless, the extent to which it has been able to curb imports would be visible in FY22 data once released by the government. As per QCO, every toy has to conform to the requirements of Indian Standards and also bear the BIS Mark under a license from BIS.  

Now since the QCO is applicable not just to domestic manufacturers but also to foreign manufacturers who intend to export their toys to India, the decline in imports is directly seen in this context as it involves cost. “The decline has been also due to quality control order and BIS for exporters to India. While imports have declined but we see markets still flooded with cheap Chinese goods particularly electronics as electronic toy production is insignificant in India. Maybe it will take some time for Indian toys to be more visible in markets than Chinese toys,” a consultant at a market research firm told Financial Express Online on anonymity. 

In August last year, Prime Minister Narendra Modi in his monthly Mann ki Baat address had urged India to become a global toy production hub and had also stressed on toy startups to focus on innovation to boost manufacturing and global imprint of Indian toys. According to a KPMG and FICCI September 2021 report State of Play, the Indian toy sector would be worth $2 billion by 2025 with a 2 per cent target share of global exports as over 300 million children are in the age group of 0-14 years.

In 2020, the top five imported toys were dolls and action figures worth $47 billion with a 60 per cent import share followed by electronic toys worth $22 billion with a 26 per cent share. Board games and puzzles imported were worth $4.8 billion and had 2 per cent share while plush toys imported amounted to $1 billion and had a 1 per cent share in imports. Other toys imported were worth $5 billion with an 8 per cent share, according to the report.

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The sector’s exports had jumped from $33 million in 2010 to $238 million in 2019 before dipping to $224 million in 2020 amid Covid. Moreover, as per Invest India, the current size of the sector was around $1.5 billion, making up 0.5 per cent of the global market share. The manufacturers are largely scattered across NCR, Maharashtra, Karnataka, Tamil Nadu region and clusters across central Indian states. India’s toy sector is fragmented with 90 per cent of the market being unorganized. The MSME base, beyond registered units, is strong but largely unorganised.

“Indian manufacturers are definitely getting the benefit of declined imports. The production has already increased with the decline in imports and is increasing further with more units coming up. States such as Uttar Pradesh is coming up with a toy park, Rajasthan is coming up with a toy city, and Karnataka would be having their own toy cluster. So the government’s focus is certainly on the sector. The increase in production is estimated to be more for indoor toys at around 50 per cent,” Mannu Gupta, Owner at outdoor toys manufacturing company Playgro told Financial Express Online. Playgro is among the largest players in outdoor toy making in India such as slides, swings, rockers, etc. The company had secured BIS license worth Rs 6 lakh.

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