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24-January-2024-Special-Article
January 24 @ 7:00 am - 11:30 pm
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:
- 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).