On India’s toy industry- The truth about India’s booming toy exports

Source: The post India’s toy industry has been created, based on the article “The truth about India’s booming toy exports” published in “The Hindu” on 24th January 2024.

UPSC Syllabus Topic: GS paper 3- Indian economy- changes in industrial policy and their effects on industrial growth.

News: The article discusses how India’s toy industry became a net exporter since 2020-21.

What is the current state of India’s toy industry?

Net Exporter Status: The trade balance was negative ₹1,500 crore in 2014-15, which turned positive from 2020-21 after a gap of 23 years.

Significant Export Growth: There was a 239% increase in toy exports between 2014-15 and 2022-23.

Decline in Imports: Imports of toys decreased by 52% in the same period.

Rise in Import Duty: Customs duty on toys was raised from 20% to 60% in 2020 and then to 70% in 2023.

What are the factors responsible for the improvement of India’s toy industry?

Protectionist Policies: The shift in the toy industry’s performance is attributed to the government’s protectionist measures, such as increased tariffs and import restrictions.

Implementation of Non-Tariff Barriers: The introduction of quality control orders and mandatory testing for each import consignment made it tougher for foreign toys to enter the Indian market.

Global Supply Chain Disruption: The COVID-19 pandemic disrupted global supply chains, affecting toy imports and indirectly benefiting domestic producers.

Government Initiatives: The ‘Make in India’ campaign, initiated in 2014, aimed to boost domestic manufacturing, which included the toy industry.

What are the major concerns related to India’s toy industry?

Over-Reliance on Protectionism: The industry’s growth is attributed to high import duties and trade barriers, which may not be viable long-term strategies. Prolonged reliance on protectionist measures might hinder the industry’s global competitiveness.

Limited Improvement in Domestic Production: There’s been no significant enhancement in domestic toy manufacturing, with labor productivity declining from ₹7.5 lakh per worker in 2014-15 to ₹5 lakh in 2019-20.

Potential for Rent-Seeking Behavior: There’s a concern that continuous protective measures could lead to inefficiencies and focus on maintaining government support instead of improving productivity or innovation.

What should be done?

Complementing Protectionism with Investment: Pair protectionist policies with investment in the toy industry to enhance productivity and innovation.

Focus on Domestic Capability Expansion: Invest in developing local manufacturing capabilities, considering the lack of significant improvement in domestic toy production.

Providing Industry-Specific Infrastructure: Develop public infrastructure tailored to the needs of the toy industry to support its growth.

Preventing Policy Entrenchment: Avoid the long-term entrenchment of protectionist policies, which could lead to inefficiency and rent-seeking behavior.

Transparent Policy Review and Dialogue: Make research studies like the IIM-L report public for better policy understanding and effective decision-making.

Question for practice:

What are the key factors responsible for the improvement of India’s toy industry, and what are the major concerns associated with it?