Can India sustain its boom in toy exports?

MSME, zLead Slider

In recent years, the toy industry in India has gone through a paradigm shift. Between FY15 and FY23, India’s toy industry experienced a major transformation, from being import dependent to emerging a promising export hub. Toy exports shot up by 239%, while imports dropped by 52%, positioning the nation as a net exporter.

Important policy steps, like making Bureau of Indian Standards (BIS) approval necessary for selling toys and increasing the basic custom duty to 70%, have been crucial in boosting the production of toys made in India. According to IMARC, the Indian toy market size is expected to reach US$ 4.4 billion by 2032. Let’s delve into potential further steps to invigorate the trade of Indian-made toys.

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Reminiscing about the days spent stacking colorful rings or enjoying classic board games like Monopoly and Scrabble brings back fond memories for most. Those afternoons of constructing cities with model train tracks or building intricate structures with LEGO sets were truly special. Over time, digital games have gradually replaced traditional toys in capturing children’s interest.

Well, for most of us, toys are ‘child’s play’, but for the industry, India’s toy market is serious business. According to IMARC, the Indian toy market size reached US$ 1.7 billion in 2023 and is expected to reach US$ 4.4 billion by 2032, growing at a CAGR of 10.6% during 2024-32.

India has been traditionally a net importer of toys, an issue that the government has been working diligently to address. In the past few years, these efforts are bearing results as per a report by IIM Lucknow. During the period between FY 2014-15 and 2022-23, imports declined by 52% and exports have risen by 239%. The report mentions that there is a significant development in the overall quality of toys available in the domestic market as well.

The manufacturing ecosystem has been enhanced over the years, with doubling of the number of manufacturing units, reduction in dependence on imported inputs from 33% to 12%, increase in gross sales value by a CAGR of 10%, and overall rise in labour productivity. Thee also seems to be a significant shift in manufacturers’ attention from China to India.

To regulate the imports and support toy exports, the Quality Control Order (QCO) was implemented from January 2021 that mandates selling of domestically produced or imported toys to comply with specific Indian Standards for safety. These standards cover various safety aspects like prevention of sharp edges, small parts hazards, flammability and the migration of harmful chemicals. Moreover, the toys must carry the Bureau of Indian Standards (BIS) certification mark (ISI Mark). The enforcement of these standards includes random checks and testing of toy consignments in NABL accredited laboratories.

Before BIS regulations, India greatly relied on imports from China. The increase in customs duty on toys from 20% to 70% between February 2020 and March 2023, along with non-tariff barriers like the quality control order (QCO) and mandatory sample testing since January 2021, significantly hindered toy imports. These measures were aimed at decreasing the demand for imported toys and safeguarding the domestic industry and encouraging Make in India initiatives. Additionally, the COVID-19 pandemic disrupted global supply chains in 2020-21, impacting imports overall. Although the global supply chain gradually recovered in 2022-23, India’s net exports decreased, highlighting a link between supply chain disruptions and India’s export performance.

Impact on toy trade

The introduction of higher import duties and the QCO has positively impacted the toy trade in India. According to a report by Global Trade Research Initiative (GTRE), the toy imports witnessed a drastic fall from US$ 304.1 million in FY2019 to US$64.9 million in FY2024.

Following the implementation of import duty increase in February 2020 and QCO in January 2021, the country witnessed the steepest decline between FY2020-22, demonstrating the direct impact of new regulations.

Imports dropped from US$ 279 million in FY 2020 to US$ 35.9 million by FY 2022. They slightly increased to US$ 62.4 million in FY2023 and US$ 64.9 million in FY2024.

As of import sources, the share of imports from China dropped from 87% of India’s total toy imports in FY2019 to 64% in FY2024. Although an increase in imports was witnessed from other regions such as ASEAN countries (16.7%), Sri Lanka (12.4%) and the Czech Republic (4.7%).

Though the domestic measures aimed at supporting local industry and ensuring safety, they did not boost India’s toy exports to an expected scale.

According to GTRE report, the exports significantly recorded a rise from US$129.6 million to US$177 million from FY2020 to FY2022. However, the exports had decreased to US$152.3 million by FY2024.

As per data provided by Ministry of Commerce and Industry, India’s toy industry made a remarkable rise between FY2015 and FY2023 with exports rising by a whopping 239% and imports declining by 52%, resulting in the country becoming a net exporter.

Source: GTRE, Figures in US$ million

Government initiatives to boost toy exports

Apart from increase in import duties and implementation QCO, the government has taken multiple steps to provide support for creating conducive manufacturing and export ecosystem for the toy industry, some of these are:

The Government of India developed a comprehensive “National Action Plan” for Toys in 2020 to boost local manufacturing and incentivize toy and handicraft manufacturers to make India the next global hub of toys. The plan is implemented in collaboration with 14 Central Ministries/Departments, including Education, Textiles, Railways, Science and Technology and Information and Broadcasting. It contains 21 action points across four broad themes – Promoting Trade and Investment, Design and manufacturing of Toys in India, Promoting Indigenous Toys, and Toys as learning resource.
Mandatory sample testing of each consignment and no permission for sale unless the quality testing is successful. In case of failure, the consignment is either sent back or destroyed at the cost of the importer.
Special provisions are made by BIS to grant license to micro scale units manufacturing toys without testing facility for one year and not to insist on establishing in-house facility. On industry representation this relaxation has been extended for up to 3 years.
In January 2024, BIS grated 1,454 licenses to domestic manufacturers and 36 licenses to foreign manufacturers for safety of toys.
Under the recent Free Trade Agreements (FTA) including India-UAE Comprehensive Partnership Agreement (CEPA) and India-Australia Economy Cooperation and Trade Agreement Trade (ECTA), the partner countries are providing zero duty market access for exports of Indian toys.

The path to a robust and competitive Indian toy industry lies in a multifaceted approach. Investing in research and development, strengthening partnerships, establishing specialized manufacturing hubs, modernizing traditional toys, and supporting small and medium enterprises, could help India enhance its domestic ecosystem for toy production.

Moreover, inviting global toy brands such as Hasbro, Mattel, Lego, Spin Master, and MGA Entertainment to establish manufacturing hubs in India could help in reshaping the global toy production market. Learning from China’s success in efficiently manufacturing both low-cost and high-quality toys is crucial, as is localizing the production of key inputs to decrease reliance on imports. These measures not only seek to strengthen India’s position in the global toy market but also to ensure a sustainable and innovative industry capable of fulfilling both local and international demands.

While the manufacturing ecosystem grows, it is equally important to build strong toy brands that connect with a global audience. Acclaimed toy designer Suhasini Paul states, “We need to innovate toys that offer unique features, educational value or interactive elements which can help Indian manufacturers stand out in the global market. By focusing on design innovation, India can create a niche for itself and attract discerning consumers looking for something new and exciting.” She emphasises that effective marketing and branding efforts are essential for showcasing innovative toys and communicating their unique value propositions to consumers. In this regard, leveraging digital platforms and social media can help Indian manufacturers raise awareness and generate interest in their innovative toy offerings.

It is endearing to see that a number of toy startups are now emerging in the country that are bringing in interesting innovations in this highly dynamic space. These include companies like PlayShifu, Kitsons, Shumee Toys, The Elefant, DICE Toy Labs, Nesta Toys, etc. Nurturing this startup ecosystem will be critical in the coming years with strong demand drivers propelling the toy market – large demographic dividend, increasing disposabe incomes, discerning customers and growing awareness of the impact of toys on a child’s overall development. India has successfully built a base for a self reliant toy industry, but the journey has only begun.