Indian toy industry: Unboxing the ‘export turnaround’ in India’s toy story 

Source: The post is based on the article “Unboxing the ‘export turnaround’ in India’s toy story” published in “The Hindu” on 31st May 2023. 

Syllabus: GS3- Indian economy 

Relevance: About Indian toy industry.

News: India has recently turned a net exporter of toys, during 2020-21 and 2021-22. Between 2018-19 and 2021-22, toy exports increased from ₹812 crore to 1,237 crore. Imports declined from $371 2,593 crore to ₹819 crore.  

How has been the performance of the Indian toy industry?

India’s toy industry is minuscule. In 2015-16, the industry had about 15,000 enterprises. They produced toys valued at ₹1,688 crores and employed 35,000 workers.  

Registered factories accounted for 1% of the number of factories and enterprises. They employed 20% of workers and produced 77% of the value of output.  

Between 2000 and 2016, industry output was halved in real terms with job losses. Imports accounted for up to 80% of domestic sales until recently. Between 2000 and 2018-19, imports rose by nearly three times as much as exports. 

India hardly figures in the global toy trade. Its exports are merely a half-percentage point of total global export.  

What explains the sharp turnaround in the toy trade in just three years?

Imports contracted as the basic customs duty on toys tripled from 20% to 60% in February 2020.  

Numerous non-tariff barriers were imposed as well such as production registration orders and safety regulation codes. It contributed to import contraction. 

How is the scenario of the Indian toy industry different from other countries in Asia? 

Historically, Asia’s successful industrialising nations promoted toy exports for job creation. For example, Japan started about a century ago, China since the 1980s, and currently Vietnam is following in their footsteps.  

India followed an inward-oriented industrial policy in the planning era. It provided a “double protection” by import tariffs and reservation of the product for the small-scale sector. As a result, toy manufacturing remained stagnant, archaic and fragmented.  

In 1997, the reservation policy was abolished. New firms entered the organised sector, but only for a while. Productivity growth improved. But the unorganised sector languished with job losses. 

How do more recent policy initiatives, such as ‘Make in India’, have a bearing on the Indian toy industry? 

There is no evidence of ‘Make in India’ positively affecting the toy industry on a sustained basis. The output of the informal or unorganised sector shrank. But, it continues to account for the majority of establishments and employment. 

Industry de-reservation failed to sustain output, investment, and productivity growth after 2007-08. ‘ 

What is the way forward for the growth of the toy industry?

Neither the reservation policy nor its abolition after the liberal reforms boosted the industry’s performance.  

One should perhaps look beyond simplistic binaries of planning versus reforms. There is a need to examine the ground reality of industrial locations and clusters to make policies and institutions to nurture such industries.