“There has been a rich tradition of local toys in our country. There are many talented and skilled artisans who possess expertise in making good toys. Toys are very important for the development of children. We have given focus on toys in the National Education Policy too. Learning while playing, making toys, etc, has been made a part of curriculum. Even Rabindranath Tagore has spoken about the importance of toys. India has the talent and the ability to become a toy hub by making toys for the entire world,” said the prime minister.

Experts are of the view that to make India a global hub for toys will require a concerted effort on the part of all stakeholders. The government will have to come up with a comprehensive policy framework and action plan towards building a requisite infrastructure and providing fiscal incentives for attracting investments into this industry, which is currently in a position to meet only 25-30 per cent of the domestic consumption that has been growing rapidly with the changing demographics and growing income levels. Rest of the demand is met by imports from China which contributes over 80 per cent to the total imports, as also Vietnam,Hong Kong Malaysia, Indonesia and Thailand.

The Indian toys market continues to be heavily dependent on imports as the domestic industry is unable to meet the total demand. Moreover, the industry with 3,500-odd units, primarily in the unorganised sector, manufactures only some of the basic non-functional categories like soft and plastic toys, dolls, puzzles and board games. Most of the mid and high-end categories including functional and electronic toys are imported.

Though global giants like Hasbro and Spin Master have built some manufacturing facilities in India, they normally make only a very little portion (that too some basic items) of their portfolio in India. For example, Spin Master produces only 28 SKUs in India out of its 30,000-odd SKUs. They along with other global brands present in India, also source most of its requirement from China.

Most of these global players have created sourcing hubs in India for their global supplies. They make some very basic items or parts/portions of the products and supply them to their global facilities. There are a very few Indian players like Funskool, Playmate, Toy Craft, MIKO Play Panda and Buddyz, etc, in the organised segment and they too source a good deal of components and electronic portion from overseas market primarily China.Currently, over 75 per cent market is unorganised, while the contribution of branded toys is not more than 10-15 per cent. India is a price sensitive market and here consumers often prefer low priced toys from unorganised market, even as some traction has been noticed lately in the branded segment where the prices could even be higher by 100 per cent.
 
Massive duty hike

Experts say that as a manufacturing industry also India is heavily dependent on imports and any major obstacle – by way of considerable hike in duty – on the import front will only adversely impact their operations at a time when the toy industry is struggling to cope with the challenges arising out of the Covid-afflicted scenario.Moreover, there will also be a long-term repercussion.

According to experts, such a blanket hike in duty by the government will only adversely impact the industry as also the entire market, and hence there should be a mechanism whereby the whole process could be implemented in a staggered and selective manner without disrupting the entire toy manufacturing and retail ecosystem in the country.

They view that this hike will considerably inflate the toy prices across categories in the retail market, making them unaffordable for Indian kids who are currently full of aspiration and looking for everything that is available in the global market. In the last decade or so, the Indian toy market has come a long way and could be in a position to provide its consumers a global range due to seamless global supply. Moreover, such a massive duty hike has come at a time when the retail market is considerably hit due to the Corona crisis.

They are also of the opinion that the duty should be structured in such a manner that the categories where Indian manufacturers have their presence and where there is potential of manufacturing exists, get the desired protection from thesecheaper imports. While in the case of mid to high-end products, duty should be structured in such a manner that on the one side it should not disrupt the supply and demand in the retail market, on the other hand, it should keep encouraging investments and manufacturing of these categories in the domestic industry.

Experts believe that if the entire toy consumption gets impacted due to such a prohibitive duty hike then it will have a very adverse ramification on the entire market place and that will consequently impact the overall industry sentiment and thereby the government’s entire intention and efforts towards building a strong toy manufacturing base in the country and supplying to the global market (increasing India’s share from the current mere 0.5 per cent) will remain a pipe dream.

Meanwhile, it has also been countered that the hefty duty rise might not impact the imports to that extent as being perceived by many. This is because China being a signatory of the Asia-Pacific Trade Agreement (APTA) will continue to enjoy concessional duty. Due to 43 per cent discount in import duties allowed for APTA members – India, China, Korea, Laos and Sri Lanka, the actual duty on toys imported from China post increase will be around 34 per cent. However, traders assert that India may revisit this agreement in the changed scenario (strained relationship) and may not allow China to avail this discount.

“With the Covid-19 setting in just after this unprecedented hike in import duty on toys, we are yet to see the adverse impact reflecting on the retail prices. But going forward, as the demand picks up with the opening up of retails, we will see prices going up at least by 50-60 per cent. Already the demand is down by 50-60 per cent due to Covid restrictions and now as the duty hike gets translated into the toy prices, toy retailers and distributors will be nowhere to go,” says Subhash Garg, president, Toy Association, Gururgam and chairman, Toy Committee, Federation of All India Vyapar Mandal. Garg feels that the move will hurt over 500,000 toy traders, retailers and artisans.

“This kind of hike in import duty will not help in protecting the industry, instead this will disrupt the entire industry and the domestic market adversely. On the one hand, you are depriving the Indian consumers the access to quality toys by making their prices unaffordable, on the other, the industry will also be deprived of access to right quality benchmark. In fact, it’s a deprivation move not an enabling one,” states Mukesh Jagwani, CEO & managing director of Mumbai-based WinMagic Toys Pvt Ltd.
 
Cumbersome process

WinMagic Toys is one of the few sought-after companies by retailers and consumers, that has been setting new trends and categories such as ‘Girls’ Collectibles’ by launching brands like Hatchimals, Shopkins and L.O.L Surprise! Dolls. They’re known to be the leader in pre-school licensed toys category with brands like Paw Patrol, PJ Masks etc. As an importer and marketer, WinMagic Toys represents top global toy companies like Spin Master, Moose Toys and Just Play, exclusively in India and the SAARC region. It also imports and makes a veritable character toys portfolio for properties like Disney, Marvel, Peppa Pig and Paw Patrol among others.

Jagwani adds that for years, the imported toys of top branded toy companies in the world, that are articulate and fully functional have inspired the imagination of Indian kids and created access to safe and wholesome growth and development for kids, as well as provided the necessary benchmark and competitiveness for development of Indian toy market and industry. These international toys which are anyways sold at a premium of 100 per cent plus over Indian made toys of similar size, have never cannibalised the simple and much cheaper toys made by Indian industry. Hence placing curb will prove a counter-measure to the government’s intention of making India a preferred source of toys for the world.

As if that was not enough, now the 3,500-odd toy makers along with overseas players will have to undergo a cumbersome certification process where, as against industry expectation of self certification, the government has come up with this order where the certification will have to be done as per Option 1 (Normal Procedure) i.e. after receipt of application, BIS will conduct factory inspection and draw samples for testing in BIS-recognised laboratories. Moreover, the manufacturing facilities will also have to set up their own quality testing facilities.

While the government has gone ahead with its order, making certification mandatory from 1 September, the entire toy trade and industry are finding it tough to comply with this and sought an extension citing Covid-related challenges. They feel that both hike in import duty and BIS certification together, has turned out to be a double-whammy for the industry, and will severely hit the industry, particularly when the industry is down with Corona crisis. They feel that in the current form, the entire certification process is also quite cumbersome as also costly affair and hence the government should have prepared the industry first before implanting it in hurry.

“We welcome the government for bringing toys under the purview of BIS quality standards. We are ready to follow the set guidelines, but we need some time, particularly this time round when we are almost struggling to revive our factories and businesses,” says Manish Kukreja, president of Mumbai-based The All India Toy Manufacturers Association (TAITMA).
 
Too little time

Echoing a similar view, Manu Gupta, convenor, technical committee of Toy Association of India (TAI), another national trade and industry body based in Delhi, says that the toy industry is all for such compliance which can create quality benchmark for the market and help it create a strong manufacturing base in the country. “But the time given for adapting and adopting is too short, particularly when pandemic has severely hit us. There is need for some capacity building and awareness exercise towards preparing the trade and industry players,” adds Gupta.

“So far as foreign brands are concerned, they have always been following very stringent quality norms and hence it would not be any problem for them except that they will now have to undergo one more procedural process to comply with BIS standards. But all in all these reputed brands are always ready to conform to the laws and regulations of that country where they are selling their products,” states Jagwani.

Meanwhile, experts are of the view that if at all the government is keen to develop India as a global toy manufacturing hub, it will have to show serious intention as also action plan, which can encourage investments not only from within the country but also from overseas. There is a need to ensure ease of doing business apart from other incentives. The lack of research and development and designing facilities, has prevented the domestic manufacturing from graduating to its next levels.
“Design and mould are the major part of the production. In our country, there are no toy designing institutes. These things are the most important for toy production. Moreover, we also need scale for making our production economically viable,” says Gupta adding: “We need a think-tank with ideas as also plug and play infrastructure, which can help build a robust toys production base in the country.”

“To promote local manufacturing, incentivising manufacturing would be a much bigger invitation for international toy manufactures to set up shop in India and export to worldwide markets, rather than making it difficult to import,” says Jagwani.

Meanwhile, India as a country presents huge potential for toys business.India has one of the largest young populations in the world, owing to which, the toy market in the country has witnessed a rapid growth. Driven by a huge consumer base, India represents an important market for toys. With a population of around 1.3 billion, it is the second largest populated country in the world. Moreover, the country has a very large young population with around half of the total population under the age of 25.

Currently, the market has access to a wide array of both traditional and modern toys. However, with evolving trends, there has been a shift from conventional toys towards innovative and hi-tech electronic toys. For instance, global toy maker Lego from Denmark has replaced wooden building blocks with innovative plastic construction blocks, while US major Mattel’s Barbie dolls have now taken over traditional cloth dolls.

There are a large variety of toys currently available in the Indian market. The diverse product category ranges from traditional plush toys, construction and building toys, dolls, board games and puzzles to high-end electronic toys, educational toys, ride-ons, etc. There are toys which are domestically produced by small, medium and large manufactures and also those that are produced from renowned international brands, even as each toy category has both inexpensive and high-end versions.

With all this developments in place, we can say that there is quite a strong market for toys in the country. But what we need is to create our own manufacturing base and for doing so we need a comprehensive thought process and an action plan. No doubt, we have to protect our industry and check the inflow of unsafe toys into our country. But all this has to be done in a manner that our whole purpose of building a strong toy manufacturing nation is not defeated. We have to create a conducive climate and infrastructure to attract investments in this field. It is also an opportune time to put up a roadmap to achieve these set of goals, even as some of the global toy maker may look to shift some portion of their investments out of China.