Relevance: GS-3: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development, and Employment.

Key Phrases: India’s $1 billion toy industry, Covid-induced supply disruptions, melamine contamination, Chinese toys, niche products, KPMG-FICCI study, MSME clusters, toy clusters, ethnic, elegant, and eco-friendly toys.

Why in News?

• In a recent Maan ki Baat address, Prime Minister pointed to a remarkable transformation in India’s $1 billion toy industry.

Growth of the domestic toy industry:

• India’s toy imports, essentially from China, have fallen by 70 percent in the last three years from $371 million in 2018-19 to $110 million in 2021-22, while exports have risen 61.4 percent in the same period, from $202 million to $326 million.
• The industry has turned into a net foreign exchange earner since 2020, after being a net importer to the tune of $150-200 million or more in the three or four years that preceded it.

How has the toy industry turned into a forex earner?

• While some fortuitous factors have turned Indian toys into a forex earner, policy moves also seem to have paid off.
• Covid-induced supply disruptions ramped up the cost of imported Chinese toys, rendering Indian toys more competitive in the domestic market.
• But perhaps the biggest game-changer on the toy import scene was the sharp increase in basic customs duty from 20 percent to 60 percent on most imported toys (wheeled toys, dolls, puzzles, and recreational models) since February 2020.
• Quality norms for Indian toys, mandated by BIS and DGFT amid the first Covid wave, might have sent the right signals to the UK, Germany, and the Netherlands, India’s major markets.
• While China accounts for over 60 percent of global toy exports of about $90 billion (according to a September 2021 study of the sector by KPMG and FICCI), the melamine contamination of its toys has raised concerns.
• The challenge before India is to maintain its cost advantage, develop niche products and develop a reputation for quality.

Employment potential:

• Given India’s export potential, the size of its domestic market (above 300 million children), and the employment intensity of the toys industry, the Centre has done well to give toys an ‘atmanirbhar’ push.
• According to the KPMG-FICCI study, for every $100 million investment in the sector, 20,000 direct jobs and another 8,000 indirect jobs can be created.
• The sector is largely unorganized, with 70 percent existing in the micro space, employing 4-5 lakh artisans.

Future growth potential:

• An expansion of the domestic market from over $1 billion now to $2 billion by 2024-25 can be met by 40 percent domestic output, against 15 percent till about three years back.
• Achieving a global export share of 1 percent (about $1 billion) in a few years does not seem unrealistic.

Toy clusters:

• Several toy clusters, about eight large and over 30 smaller ones for toys and handicrafts, have been approved.
• Maharashtra, which accounts for over 30 percent of India’s toy exports, is planning its clusters.
• India’s first toy cluster based in Koppal in Karnataka started its operations and is expected to generate 40,000 jobs in five years.
• The cluster will include raw material suppliers, shared infrastructure such as plug-and-play industrial sheds, research, and development, design and prototyping, testing, training, quality certification, customs, ancillary industries, and service providers, etc.

Government initiatives aiding industry growth:

• First-of-its-kind Virtual India Toy Fair 2021 was organized from 27th February 2021 to 4th March 2021.
• “Toys” was identified as one of the key sectors under Aatmanirbhar Bharat Abhiyan.
• A National Action Plan for toys devised in consultation with several central ministries and departments.
• Toycathon-2021 was launched by the Ministry of Education to challenge India’s innovative minds to conceptualize novel toys and games based on Indian civilization, history, culture, mythology, and ethos. This initiative aimed to develop more intelligent toys in India with the help of AI.

Barriers to the Growth of the Toy Industry in India:

• Higher GST rate:
  • At present, the GST rates on toys are 18% which is not a lot, but still, there is a space for tax reduction, which will further decrease the price of toys and will boost sales.
• Unavailability of Raw material:
  • The unavailability of major raw materials acts as a main barrier to the toy industry in India. India does not produce enough raw materials required for the toy industry. Thus, companies import it from other nations which increases the prices of toys in India.
• Lack of technology:
  • Lack of technology also seems to act as a barrier to the Indian toy industry. Even after huge advancements in technology, India hasn’t got enough to compete with the other players in the toy industry like China, Japan, and the USA.
• Limited manufacturing capacity:
  • India has limited manufacturing capability in battery-operated, electronic, and technology-based toys.
• Other challenges:
  • The vastly unorganized and fragmented Indian toy industry faces challenges due to the lack of design innovations, linkages with bulk buyers, quality training and testing, and low expenditure on advertising or brand building.

Way forward:

• Industry allegations of under-invoiced and cheap Chinese toys continuing to enter the market must be looked into.
• But the key issue is for India to carve its own niche. While experts have identified a market opportunity in plastic toys, India should develop its ethnic products.
• While wheeled toys account for 58 percent of the world trade and video games and other electronic toys another 23 percent, there is space for India to offer a unique blend of traditional and modern designs.
• Design and educational experts should team up with MSME clusters to create toys out of items of common use, be they coir or discarded material.
• A space for ethnic, elegant, and eco-friendly toys is waiting to be tapped. Policies that push homogeneity over diversity will not serve India’s cause.

Source: The Hindu BL

Mains Question:

Q. “Indian toys can become world beaters, with supportive policies and niche products”. Discuss.