Central Idea

• India’s toy industry has witnessed a remarkable turnaround in recent years, transitioning from being a net importer to becoming a net exporter during 2020-21 and 2021-22. The credit for this achievement is often attributed to the Make in India initiative launched in 2014 and related policies. However, it is crucial to examine whether this surge represents sustained industrial growth or is a temporary outcome of protectionist measures.

The import-export dynamic of India’s toy industry

• Historical Imbalance: Historically, India’s toy industry has been characterized by a significant imbalance, with imports dominating the market. Imports accounted for a substantial share of domestic toy sales, often reaching up to 80% of the market.
• Recent Shift: In recent years, there has been a notable shift in the import-export dynamic. Between 2018-19 and 2021-22, toy exports from India have seen significant growth, increasing from $109 million (₹812 crore) to $177 million (₹1,237 crore). At the same time, toy imports have declined from $371 million (₹2,593 crore) to $110 million (₹819 crore), according to official data.
• Factors Driving the Shift: Several factors have contributed to this shift. The “Make in India” initiative launched in 2014, aimed at promoting domestic manufacturing and boosting exports, has played a crucial role. Additionally, policy measures such as higher import duties and non-tariff barriers have influenced the decline in toy imports.
• Positive Transformation: The shift in the import-export dynamic represents a positive transformation for the Indian toy industry. It signifies improved manufacturing capabilities, enhanced competitiveness, and the ability to meet domestic and international demand through domestic production and exports.
• Small Global Share: Despite the positive shift, India’s share in the global toy trade remains relatively small, representing only a fraction of the overall market. There is still room for further growth and expansion to increase market share and global competitiveness.
• Key Considerations: Monitoring and nurturing the import-export dynamic is crucial for sustaining this positive trend. Factors such as policy support, investment in research and development, innovation, quality improvement, and adherence to international standards will play essential roles in strengthening India’s position as an exporter of toys.
• Opportunities and Challenges: The evolving import-export dynamic of the toy industry presents both opportunities and challenges. Continued efforts to foster domestic manufacturing, promote innovation, enhance product quality, and implement export-oriented policies will be critical for sustained growth and competitiveness in the global market

The impact of reforms and the ‘Make in India’ initiative on India’s toy industry

• Increased Focus on Domestic Manufacturing: ‘Make in India’ aimed to promote domestic manufacturing and reduce dependence on imports. It led to a renewed focus on developing and enhancing the manufacturing capabilities of the toy industry in India.
• Policy Reforms: Reforms such as the abolition of the reservation policy and the introduction of ease of doing business measures created a more favorable environment for businesses, including toy manufacturers, to operate and invest in India.
• Boost to Organized Sector: The entry of new firms into the organized sector following the abolition of the reservation policy contributed to improved productivity growth. It allowed for the formalization of the industry and attracted investments.
• Increased Customs Duties: As part of the protectionist measures, the basic custom duty on toys was tripled from 20% to 60% in February 2020. This increase in import duties aimed to discourage toy imports and promote domestic production.
• Non-tariff Barriers: Along with higher import duties, the imposition of non-tariff barriers such as production registration orders and safety regulation codes contributed to a contraction in toy imports, further supporting the domestic toy industry.

Facts for prelims

Critique on Sustainable Improvements or Protectionist Measures

• Lack of Long-term Evidence: The shift from being a net importer to a net exporter has occurred in just a few years, and it may be premature to conclude that these improvements are sustainable in the long run. A more extended period of consistent growth and performance would provide a stronger basis for claiming sustainable improvements.
• Dependency on Protectionist Measures: Relying solely on protectionism can create artificial market conditions and hinder the industry’s ability to compete globally on its merits. Sustainable improvements should be based on factors like innovation, productivity, and competitiveness rather than protectionism.
• Short-term Solution: Protectionist measures, such as higher import duties and non-tariff barriers, may provide temporary relief to domestic industries by limiting imports. However, they often fail to address the underlying challenges and structural issues within the industry.

Way ahead

• Comprehensive Policy Framework: Develop a comprehensive policy framework specifically tailored to the needs of the toy industry. This framework should address issues related to infrastructure development, access to finance, technology upgradation, skill development, and innovation support.
• Encouraging Investment: Encourage both domestic and foreign investment in the toy industry by providing incentives, tax breaks, and streamlined procedures for setting up manufacturing units.
• Enhancing Competitiveness: Focus on improving the competitiveness of Indian toy manufacturers through measures such as improving quality standards, promoting design capabilities, and fostering innovation.
• Skill Development and Training: Implement skill development programs to enhance the capabilities of the workforce engaged in the toy industry.
• Strengthening Industry-Academia Collaboration: Foster collaboration between industry players and academic institutions to promote research and development activities, knowledge exchange, and skill development.
• Export Promotion: Actively promote Indian-made toys in international markets through trade fairs, exhibitions, and targeted marketing campaigns. Develop export-oriented strategies to tap into global demand and establish India as a reliable and competitive toy manufacturing hub.
• Supporting MSMEs: Provide specific support and incentives to micro, small, and medium-sized enterprises (MSMEs) in the toy industry. This can include access to finance, technology support, marketing assistance, and capacity-building programs to enhance their competitiveness and contribute to the growth of the sector.

Conclusion

• India’s transition to a net exporter in the toy industry is a positive development. While protectionist measures may have played a role in the recent turnaround, sustaining net exports necessitates strengthening domestic investment and production on a sustained basis. By considering lessons learned, India can chart a path towards sustainable growth and competitiveness in its toy industry and beyond.

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