24-January-2024-Special-Article

THE TRUTH ABOUT INDIA’S BOOMING TOY EXPORTS

India’s toy industry, though small in scale, has experienced a remarkable turnaround, transforming from a net importer to a net exporter between 2014-15 and 2022-23.

Current State of India’s Toy Industry:

• Net Exporter Status: Trade balance shifted from a negative ₹1,500 crore in 2014-15 to positive in 2020-21 after a 23-year gap.
• Significant Export Growth: Toy exports surged by 239% between 2014-15 and 2022-23.
• Decline in Imports: Imports of toys witnessed a notable decrease of 52% during the same period.
• Rise in Import Duty: Customs duty on toys escalated from 20% to 60% in 2020 and further to 70% in 2023.

Factors Responsible for Improvement of toy industry:

• Protectionist Policies: Government’s protectionist measures, including increased tariffs and import restrictions, played a pivotal role.
• Non-Tariff Barriers Implementation: Introduction of quality control orders and mandatory testing for each import consignment made entry tougher for foreign toys.
• Global Supply Chain Disruption: The COVID-19 pandemic disrupted global supply chains, indirectly benefiting domestic toy producers.
• Government Initiatives: The ‘Make in India’ campaign, launched in 2014, aimed to bolster domestic manufacturing, including the toy industry.

Major Concerns Related to India’s Toy Industry:

• Over-Reliance on Protectionism: Industry’s growth heavily dependent on high import duties and trade barriers, raising concerns about long-term global competitiveness.
• Limited Improvement in Domestic Production: Minimal improvement in domestic toy manufacturing, with labour productivity declining from ₹7.5 lakh per worker in 2014-15 to ₹5 lakh in 2019-20.
• Potential for Rent-Seeking Behaviour: Persistent protective measures might lead to inefficiencies, with a focus on maintaining government support rather than improving productivity or innovation.

What should be done?

• Complementing Protectionism with Investment: Pair protectionist policies with substantial investment in the toy industry to enhance productivity and encourage innovation.
• Focus on Domestic Capability Expansion: Invest in developing local manufacturing capabilities, addressing the lack of significant improvement in domestic toy production.
• Providing Industry-Specific Infrastructure: Develop public infrastructure tailored to the needs of the toy industry to support its growth and competitiveness.
• Preventing Policy Entrenchment: Avoid prolonged reliance on protectionist policies to prevent potential inefficiency and rent-seeking behavior in the industry.
• Transparent Policy Review and Dialogue: Make research studies, such as the IIM-L report, public for transparent policy understanding, fostering effective decision-making, and encouraging meaningful dialogue.

Mains Question:

1. What are the primary factors contributing to the enhancement of India’s toy industry, and what significant concerns are linked to this improvement? (150 WORDS).