Beijing: With the help of a new government initiative, Indian toy makers should be able to increase their production capacity and compete globally, further reducing China's domestic market share.

The Government of India will announce a Production Linked Incentive (PLI) scheme with a proposed outlay of US$424 million for the toy industry "very soon", according to Ajay Agarwal, president of the Toy Association of India.

According to Agarwal, we have appointed a committee to consult the government to complete the draft of the PLI.

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The five-year program would subsidize domestic toy makers to sell their products.

A rare bright spot in India's recent efforts to reduce dependence on Chinese imports has been the toy industry. To reduce dependence on Chinese imports and increase domestic manufacturing,

New Delhi has adopted a number of measures and has benefited from Western efforts to decouple from the world's second largest economy.

According to Anubhav Jain of United Agency Distributors, a manufacturer of plastic toys, the support provided by the PLI scheme will encourage smaller players in the market to think strategically.

According to Statista data, China is the world's largest producer of toys, accounting for more than 70% of the market's total production and 56% of its exports.

According to Amit Chakraborty, president of Aqueous Toys, one of the largest producers and exporters of toys in India, "the number used to be higher." Mexico, Vietnam and India are the current three directions in which manufacturing has moved forward.

According to a report released last year by KPMG India and the Federation of Indian Chambers of Commerce and Industry, China accounted for 86% of India's toy imports between 2016 and 20. As per the report, India is mainly dependent on plastic and electronic.

In contrast, India's total toy imports have declined by more than 70% in the last three years, from US$ 371 million in the 2017-18 fiscal year to US$ 110 million in 2021-22. On the other hand, India's exports increased by 61.3% from US$ 202 million to US$ 326 million during the same period.

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The government greatly helped the domestic industry in 2020 by introducing stricter import rules for toys, including quality control certification and raising the standard customs duty from 20% to 60%.

Since the toy industry is a very small sector of the economy, at first we did not understand why the government would impose a law on it, Jain said.

However, it was great when we realized that they were trying to help us set up industries all over India.

According to a KPMG report, the size of the toy market in India could double by 2024-2025, from US$ 1 billion to US$ 2 billion.

According to experts, the PLI scheme has the potential to fuel this growth. This will not only help manufacturers to increase production and exports, but will also increase employment.

Manu Gupta, director of Playgro Toys India and a member of the consultative committee chosen by the Toys Association of India to work on the PLI draft, said the government is trying to understand the shortcomings in the industry and how other countries directly benefited the industry Is. or indirectly.

According to the 2021 report, India's heavy dependence on imported electronic toys is one of the fastest growing segments of the toy market, notes Gupta.

According to Naresh Kumar, CEO of Funju Toys, most of the electronic components required for battery-operated toys are imported from China.

Since these items are unavailable in India, according to Kumar, we import fabric (for plush toys) and electronic modules with chips. Although India has started producing clothes, we are unable to compete with China's quality and price.

Citing the need for government intervention, Kumar claimed that some manufacturers have a habit of under- or mis-declaring electronics imports from China.

However, the supply chain for electronic toys is starting to take shape. Aequs Toys is setting up a special economic zone on 430 acres of land in the city of Koppal in the southwest Indian state of Karnataka, along with other significant manufacturers, according to Chakraborty.

To create an ecosystem where we won't need to leave Koppel to make our toys, "we will set up our own [printed circuit board] manufacturing, packaging and hardware units."

The Koppal Economic Zone may resemble a smaller-sized version of China's Guangdong region, which is known for its toy manufacturing.

Chakraborty said that the market for electronic toys in India is less than 10% of the total market, and "using electronic toys as an example of India's dependence on China is a very unbalanced view [of the toy industry]".

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China is more developed in the field of low-cost electronics, which is necessary for producing toys, he claimed.

"India still hasn't arrived. However, if the government continues to impose import restrictions from China, this industry will be compelled to grow, as is already the case.

Up until now, plastic toys have largely been responsible for the increased exports of the Indian toy industry.
Because labour costs in India are only a third of those in China, Indian plush and plastic toys are less expensive than those made in China. 

This, along with a sizable engineering base, draws international brands and retailers to India, according to Chakraborty