Indian toy industry: A step towards self-reliance

India’s untapped toy sector showcases a huge growth potential in the global toy industry. The Government of India has emphasized on the promotion of exports and toy manufacturing in India by formulating various schemes. At the same time, the Indian toy manufacturers need to come up with new, innovative, and technologically advanced methods to boost domestic toy production and exports. 

• India is a homeland to a variety of traditional and hi-tech toys but accounts for only US$ 1.5 billion toy exports, which makes only 0.5% of the global share. China, the US, and Japan are the top three competitors in this industry.
• India’s domestic demand for toys accounts for US$ 1 billion, out of which only 20% is met by Indian produce, 80% is imported. India imports US$ 600 million worth of toys from China. Their low price point makes them highly attractive to the customers.
• Due to the COVID-19 induced lockdown, the domestic demand for toys has surged by 25% because children are locked up inside their homes.
• The government has been promoting domestic toy manufacturing and exports through various initiatives. At the same time, the Indian toy manufacturers need to come up with new, innovative, and technologically advanced methods to boost domestic toy production and exports. 

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In today’s complex world where nuclear families have become the norm. On top of that, parents are struggling to achieve that ever-so-elusive work-life balance. Due to this, it is natural for kids to feel left out of the joy of quality time with their parents, that  the latter enjoyed in their time.

While not a replacement exactly, quality toys and games serve as an important distraction for children in such a scenario. Today, the market is brimming with traditional, educational as well as technologically advanced toys. Parents are ready to invest in them, especially because they can protect children from a harmful addiction to smartphones and other gadgets. This, coupled with India’s huge demographic dividend and improving incomes, has fueled the demand of toys in the country.

The Indian toy industry at a glance

Globally, the toy market accounts for over US$ 100 billion. Over the years, the US, China and Japan have catapulted themselves to being the top three countries in terms of toy sales worldwide. India’s toy exports stood at US$ 130 million in the year 2019-2020, with the US and the UK being the lead export destinations. India , though, accounts for merely US$ 1.5 billion or 0.5% of the total global market share. But it is growing at a healthy pace of about 15% per annum, indicating a huge potential of placing the toy industry on the global map. Therefore, the country’s toy exports are expected to grow to US$ 2-3 billion by 2024.

With aggregate domestic demand of US$ 1 billion, India currently imports an estimated 80% of its domestic demand from other countries, predominantly China, which suggests that India can fulfill only an estimated 20% of its domestic demand. Currently, India is importing US$ 600 million worth of toys imported from China by India, the majority of which constitute injection-moulded plastic and electronics.

This is due to the low price points offered by Chinese toys, which make them even more attractive to the customers. This low price is because China has depreciated assets and their government provides export incentives which makes their toys inexpensive. This makes it difficult for Indian suppliers to compete in the toy market. To compete with these unbranded inexpensive Chinese toys, the Indian toy manufacturers have now started focusing on improving the design and quality of toys.

Due to the pandemic imposed lockdown, the tense situation with China and an increase in the import duty of toys, import of Chinese toys to India has reduced. But at the same time, the domestic demand for toys has surged by 25% because children are locked up in their homes. In addition to this, better equipment and machines are required to be imported from countries like South Korea and Japan to make electric toys in India.

However, a surge in import duties has made machine imports more expensive for toy manufacturers. While the manufacturers are trying to scale up the production by automating or hiring labour, 60% of India’s toy manufacturers are unorganized, consisting of small units with sometimes as few as five employees. They do not have the required capital or scale to ramp up their production in a short span of time.

Toys are serious business!

The government has been actively promoting the domestic toy industry and exports through various measures. The focus is on creating awareness about possible manufacturing units to promote B2B connections and the formation of manufacturing clusters. The toy manufacturers in India are mostly located in NCR, Karnataka, Tamil Nadu, and Maharashtra and the clusters are present across the central Indian states. The sector is fragmented with 90% of the market being unorganized and about 4,000 toy industry units from the MSME sector. They not only have their own regional identity but also support indigenous toy makers.

Commerce secretary Anup Wadhawan, highlighted the importance of creating an enabling environment for the potential exporters to improve the productivity of toys. “Toy manufacturing clusters should be developed by State Governments to attract international manufacturing base in India,“ he said. Aravind Melligeri, Chairman and CEO of Aequs SEZ Private limited- which is setting up the first toy manufacturing cluster on 400 acres of land, with an estimated investment of Rs 1,500 crore in Koppal, Karnataka, feels that the Central Government needs to include the toy industry under Production Linked Incentive scheme to help global brands partner with local manufacturers.

The government has emphasized using tourism as a tool to promote India’s culture, especially in regions that are renowned for handcrafted toys. Under the ‘Vocal for Local’ slogan and ‘Aatmanirbhar Bharat’ campaign, the government shall explore opportunities to tap the potential of the sector. A national action plan has been created by the Department for Promotion of Industry and Internal Trade (DPIIT), MSME, I&B, Education, and other departments to promote the toy industry.

Toycathon-2021, an online toy hackathon for innovative toy/games concepts, is another initiative taken by six different ministries and departments of the government to enhance the toy manufacturing capabilities. It also sought to crowdsource solutions to different problems faced by the industry. Before the surge in coronavirus cases in the second wave, the Indian Government had organized the India Toy Fair 2021, which went on from 27^th February to 2^nd March, which focused on making India a global hub for manufacturing and sourcing of toys. Mukesh Jagwani, CEO and MD, WinMagic Toys, comments:

Building India as a trustworthy destination for quality manufacturing can offer more and accelerated dividends rather than curbing imports of toys. Steps could include setting up of more SEZs, holistic reforms like relaxed labour laws that encourage the local manufacturers, decentralization of FDI approvals, superior infrastructure and connectivity and focus on technology & quality.

The eco-friendly and indigenous toys so manufactured would act as a source of entertainment and play a role in growth and development by creating exciting opportunities for learning amongst kids. This supports the Make in India scheme and showcases the rich heritage and handicraft skills of India. Events like these pave way for many organizations to invest and source toy manufactures in India. Swedish furniture maker IKEA, for instance, decided to increase its sourcing of toys and set up manufacturing facilities in India. they have announced an ambitious plan to invest ₹12,500 crores in India and set up 25 stores over the span of the next 10 years.

Indian toy manufacturers need to come up with new, innovative, and technologically advanced methods to boost domestic toy production and exports with the help of government incentives and targeted investments to remain relevant in the evolving market and to make India a global hub for toys.