How Toy Industry is Evolving in India

Indian toys and gaming manufacturers targeting new heights as the export demand increases.
How Toy Industry is Evolving in India

The toy industry, over the last year, has been in focus more than ever before. Starting with our Prime Minister’s call to the industry in his monthly ‘Mann Ki Baat’ address last year to be ‘Atmanirbhar’ in toys and to become a global toy hub, there has been plenty of action in the hitherto low-profile toy industry. The Prime Minister had asked the industry to be ‘vocal for local’ and focus on the development of toys and games based in and on India, citing that we import most of the toys that are sold in the country, resulting in an outflow of foreign exchange worth crores of rupees.

In February 2021, the Virtual India Toy Fair 2021 was held with more than 1,000 exhibitors, Toycathon 2021 was launched earlier this year to promote innovative ideas for toys and games and several seminars were organized, all aimed at promoting awareness about toys and to work towards increasing India’s share of the world toy market which is estimated at over US$ 90 billion.

Meanwhile, attention was also paid to improving the quality of the toys produced in India while also ensuring that quality standards are maintained on all imports into the country. The new regulations set by the Bureau of Indian Standards (BIS) were implemented with effect from January 01, 2021. Today, all factories producing toys in India are required to be certified by the BIS and product testing has been made mandatory. The factories from which toys are being imported into India are also required to be inspected and certified by the BIS. The higher import duties notified in the 2020 budget provided the opportunity for Indian manufacturers to compete effectively against imports from countries like China.

The results so far have been quite encouraging with a lot of design and development activity being undertaken by Indian manufacturers. We have also seen India making rapid strides as a sourcing destination for many international toy companies. With consistent policies to regulate the quality of imported toys, the Indian toy industry which currently has only a minuscule share of the world toy market is expected to register higher growth rates in the years to come. The global toy industry is big at over US$ 90 billion, and the future is loaded heavily in favor of India with its large population of children and a market that cannot but grow exponentially in the years to come. The Indian Toy industry has to be ready to cater to the demand, which is bound to grow, and the steps being taken now will have a significant impact. The industry is labor-intensive has the potential to provide employment opportunities on a very large scale.

For the industry to sustain its growth it is absolutely essential for us to design and develop products in India which have global relevance. That we can do it is not in doubt. Funskool (India) Limited, in addition to being a source for several major international companies for procuring their products has been able to establish a distribution network for our own brands in over 25 countries and the business is growing rapidly.

Developing our own products and brands is very important to sustain the domestic and export markets. Contract manufacturing for international toy companies has its limitations and is heavily dependent on `being price competitive with other sourcing destinations. In the domestic market in India, the biggest impediments to growth are low awareness about toys and affordability. We have to build awareness among parents about the need for toys in the development of the child. The ability to manufacture quality toys for the domestic market will result in higher affordability and rapid growth of the industry.

For faster development of the Indian toy industry, it may be prudent to consider some of the following steps:

1.    Concessional GST for products manufactured in India. 12/ 18 percent are very high GST rates when the attempt should be to make toys more affordable
2.    Special export incentives for exports of brands & products of Indian companies designed and developed in India 
3.    Spends on advertising and promotional expenses to qualify for tax concessions/subsidies
4.    Tax concessions/subsidies on tooling expenses incurred by Indian companies to develop their own brands and products 
5.    MEIS Scheme arrears to be released and the incentive rate for RODTEP to be notified

The domestic toy market is beginning to emerge out of the very difficult times induced by Covid-19. Lockdowns ensured that malls and stores remained closed for long spells. Funskool has so far managed to remain relatively unscathed during this difficult period when Covid-19 has been rampant. We focused more on manufacturing for our international customers while simultaneously expanding the distribution of our own brands in overseas markets, which yielded high growth in our overall export volumes. The focus in the domestic business has been on the design and development of several new products, which have been launched. We have also introduced a number of traditional toys & games which have yielded good results. We are expanding capacities at all our three plants.

We see the drop in domestic demand on account of the pandemic as an aberration and have no doubts that the Indian toy market will grow exponentially in the years to come! Licensing is very important in the toy market and Indian companies may have limitations in bidding for global licenses in the near future. The solution could be for Indian companies to have tie-ups with global toy companies for domestic manufacturing. The Indian toy market will grow to significant levels quickly and it may make sense for toy majors to scout for local partners for their Indian operations.
 

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