🧸India's Rs. 3,500 Cr Toy Play
India is taking its economic battle with China to every sector and this time the war is for the $100 bn+ toy industry.
$155.6 billion! That's the size of the global toy market.Â
And India's share? Only 0.5%!Â
This is puzzling because India was one of the first civilizations to make toys. We've been making and playing with toys for over 5,000 years now!Â
Now, we have a plan to change this and increase our toy exports: A product linked incentive (PLI) scheme worth Rs. 3,500 crores.Â
But what will this scheme do and why is India lagging behind in the toy industry?Â
🎲 The Indian Toy Story
Do you know who's dominating the global toy market?Â
China, of course (no brownie points for this guess)!
75% of the toys Aacross the world and 70% of Indian toys come from China.Â
But how does China manage to beat us in every sector?Â
Well, let's go back to 1991.
Back in 1991, India opened up its economy, allowing foreign goods inside our borders. And Chinese toys flooded our markets. But why just Chinese toys?Â
Well, since 1978, China has been focused on increasing manufacturing capacity. To do this, the government gave industries cheap loans, cheap land and cheap electricity.Â
What's more, the country focused on developing technology.Â
This secret sauce has helped it dominate every sector. The tech play and low labour costs (due to a high population) allowed China to manufacture goods at a very low cost.Â
When these cheap goods entered India, customers embraced them, killing the sales of our homegrown toymakers.Â
And this wasn't just the case with India, most countries saw this happen.Â
In fact, some of the world's biggest toymakers like Mattel (which makes Barbies) have outsourced manufacturing to China.Â
So, China had a free rule in this space.Â
But this free rule has impacted India both economically and health-wise.Â
Yes, 30% of toys from China contained hazardous heavy metals and 80% had physical safety issues.Â
So, now it's high time that India takes back control of this industry from China.
🇮🇳 What is India's Play to Rule the Toy Market?Â
Now, all this time India was focused on solving problems like lack of electricity, education, poverty.Â
But we've realised that these problems can only be solved if our economy is strong, so we're finally focusing on increasing our manufacturing capacity and becoming a major exporter to the world.Â
The only question is: how?Â
Well, the first step of the plan was to ensure that cheap and low-quality products from China stop entering our markets.Â
So, India introduced the Toys Quality Control Order in 2020. This order requires all toys meant for kids under 14 to have a BSI mark.Â
Now, this was genius because the order was announced in the midst of Covid.Â
So, while Indian toymakers were able to get plants certified pretty easily, Chinese plants struggled to do so due to their strict lockdowns.
What's more, we increased the import duty on Chinese toys from 20% to 60%!Â
Now, because the Asia Pacific Trade Agreement reduces overall import duty applied on member states, the effective rise in duty is only 34%.
But even this has helped reduce imports by 70%!Â
And our exports have gone up by 61%.
Plus, we also launched our very own toy cluster in Karnataka. This cluster is basically a one-stop shop for manufacturing, packaging, storing and dispatching toys.Â
So, we've made a lot of progress in this space.Â
But we still can't produce quality electronic toys. China can produce these toys easily (at low costs) because of its powerful tech play and availability of raw materials in the country.Â
On the other hand, we have to import raw materials for electronic toys from South Korea and Japan, which increases costs. So, a lot of manufacturers are not focusing on these toys.Â
This is exactly why we are launching theÂ
Rs. 3,500 crore PLI scheme.Â
The scheme will give incentives to companies that make incremental sales of domestic toys. Meaning if they sell more than a set threshold, they get money from the government for a set period of time. These benefits will be decided on the basis of each company's investment size.Â
This could convince a lot of foreign companies to set up shop in India and make toys domestically. It could also enable Indian manufacturers to expand operations.Â
But the sector is facing a major threat.Â
India has a huge toy market right now (worth Rs. 8,000 crores) because most of our population is young.Â
But this young generation is into online gaming, video games, AR and VR tech. So, will the toy market continue to grow?Â
Well, maybe if the current trend of adults buying toys for themselves continues. Yes, some adults are buying toys to pamper themselves!Â
But this still doesn't solve a major problem: a lot of artisans in India have been engaged in making clay and wooden toys for generations. But these toys are not "cool" anymore and their market share is going down.Â
This poses a huge threat to the livelihood of these artisans.Â
So, what can be done to grow the Indian toy industry as well as promote local artisans?
âš¡In a line: India is trying its best to reclaim the toy industry back from China and with great results!
💡Quick question: Are PLI schemes the right way to boost manufacturing?
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