In today's Finshots we see how Indian toy manufacturers have been keeping up with the times

The Story

If you walked into a toy store a couple of years ago and picked up something, there’d be a 70% chance you’d see a “Made in China” tag sticking out. That’s because 7 out of every 10 toys sold in India were imported from China. Indian manufacturers weren’t even in the picture. And for a region that boasted a rich history in toymaking, dating all the way back to the Indus Valley civilization, this was a bit of a shame.

But now, Indian toy makers are trying to regain some of their former glory with some reports indicating that sales have doubled in the past year. What’s changed, you ask?

Well, in the past couple of years, the Indian government has taken one big step to free the toy sector from the clutches of cheap Chinese toys — the Toys (Quality Control) Order. Introduced in 2020, the new regulations had the simple goal of improving the quality of toys sold in the Indian markets. Basically, any toy manufactured and sold in the country must now carry the ISI (Indian Standards Institute) mark. You know, the “gold standard” for quality. And all toys have to be put through mandatory product testing. Just to make sure it’s safe for children, you know.

The government even went a step ahead and raised customs duty on imported toys by 200%. They took the duty all the way from 20% to 60%. And coupled with the BIS certification norms, the flow of cheap toys into the Indian market slowed down. For instance, during FY20 and FY21, the imports dropped nearly 50%.

And yes, Chinese toys were the worst hit. Remember, this country had once completely dominated the global toy market.

With its manufacturing prowess and cheap labour, they flooded every country with toys. To this day, nearly 75% of all the toys sold in the world originate from China. And the country exports toys worth $45 billion. Also, with added government support, the country has been able to produce toys at a cheaper price compared to global peers. And when these toys make their way to price-sensitive markets like India, they obviously find a lot of suitors.

But there was an even more fundamental issue with Chinese toys. They weren’t just bad for local manufacturers. They were bad for consumers too.

Back in 2009, the Indian government had implemented a six-month ban on Chinese toys citing public safety reasons. Chinese toys sold in the Indian market were toxic — they contained high levels of cadmium and lead — both elements that have been known to cause cancer. Also, regular exposure to these metals can hinder brain development in kids. And they were also found to have phthalates. Phthalates are known to cause allergy, asthma, skeletal defects, and impair the lungs in children. And this was further corroborated by a study by the Centre for Science and Environment (2010) that found over 45% of toy samples tested exceeded accepted safe limits for phthalates. And in 2019, Quality Council of India found that over 67% of imported Chinese toys failed to meet India’s quality standards.

Something had to be done. So the Indian government took initiative and introduced quality standards we spoke of earlier.

But there are still a couple of hiccups before we can proclaim toy domination.

You see, when reports tell you that BIS has granted about 800 toy manufacturing licences, with 90% of all licenses going to micro, medium, and small enterprises (MSMEs), you might think we have all bases covered. The ground reality however is a bit different. Because although we have 7,560 MSMEs in this line of business, only a tiny number of toy makers have been able to keep up with the change in regulation. The others are still outside the regulatory purview.

And secondly, there’s a problem with the kind of toys we’re used to manufacturing. Typically, Indian toy makers specialised in making board games, soft toys and plastic toys. But the recent upswing in the demand for electronic toys has put Indian toy makers at a disadvantage over the biggies in the industry. Most small toy manufacturers don’t have the required equipment to make electric toys and are hesitant to make the upgrade — since the equipment attracts over 34% import duty. Naturally, that makes it a bit hard to keep up with the times.

So yeah, if the market for Made in India toys truly has to explode, these things will have to be ironed out along the way.

Until then…

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