India's toy industry: A booming sector in the making

Toys in India date back to the Indus Valley Civilization, the earliest variety being of toys found in the Indian subcontinent including whistles shaped like birds, toy monkeys which could slide down a string and small carts which were made from natural materials like clay and rocks.

Since then, the industry has come a long way, both in terms of technology and application. Advancing technology and machinery has led to the manufacture of modern and innovative toys alongside the rich heritage of traditional, handmade, region-specific toys across India.

There are a number of reasons why India is an enticing potential for investors in this sector.

The Indian toy market is worth around $1 billion and includes factory produced toys by Micro, Small and Medium Enterprises (MSMEs) and large units plus imports.

The domestic sector is further blessed with a ready availability of raw materials such as plastics, paperboards and fabrics, all at competitive prices (India is the second largest producer of polyester and related fibers globally).

Of the 4,000 strong domestic manufacturers of toys in India, 75% are micro units, standing as a testament to the widespread technical knowledge and expertise they possess to mass produce toys.

Further, labour costs in India are significantly lower than competing manufacturing hubs like Vietnam and China, leading to lower manufacturing costs for companies aiming to invest in the Indian toy space.

India’s huge consumer base – a population of over 1.3 billion – is a vast majority of young people with approximately half of the total population under the age of 25. This young population is also responsible for an increase in the domestic demand for toys as disposable incomes have risen over the past years and continue their upward trend.

The country’s economic growth has also increased the purchasing power of its middle-class population, and therefore, new consumer behaviour. Consequently, the domestic toy market has witnessed a shift away from medium- to low-end battery-operated toys, towards more innovative electronic and upmarket plush toys, and even traditional, handcrafted toys that come with their own distinct cultural tastes.

Finally, in line with the ‘Digital India’ campaign and the Prime Minister’s push for greater internet connectivity, online sales channels have accelerated the accessibility of smartphones, as a result of which, online sales channels have become one of the fastest growing distribution channels for toys in India.

Leveraging the strengths of an ‘Aatmanirbhar Bharat’

As envisioned by the Prime Minister recently, India is keen on placing itself at the centre of global supply chains while at the same time leveraging its inherent strengths through the ‘Aatmanirbhar Bharat’ campaign. Giving a clarion call to fellow Indians to be ‘Vocal for Local’, the Prime Minister has asserted time and again that a self-reliant India is not inward-looking; rather the ‘local’ in this scenario, is very well aiming to go global in the days to come. Going local in the Indian context must be understood as a way of developing the country’s manufacturing capabilities to attract businesses from all over the world.

Replicating this strategy in the toy sector, a National Action Plan for Toys has been developed with a 17-point action agenda in consultation with 14 government Departments/Ministries. These points include public procurement of domestically produced toys, promoting Made-in-India toys and indigenous toy clusters, consumer awareness campaigns, promoting export of India-made toys, implementing strict quality control, and promoting investments in the industry, amongst many others.

Several Indian states have come up with incentives to boost the domestic toy manufacturing industry. While a number of states are pushing for better marketing for their traditional handcrafted toys, they are also incentivising investors to develop and maintain new toy clusters such as those in Koppal, Karnataka and a 100-acre facility in Uttar Pradesh.

A National Toy Fair is also being organised from February 27th to March 2nd 2021 as a joint effort by the Ministry of Textiles, the Ministry of MSMEs and the Ministry of Commerce and Industry. The aim of this fair, the first of its kind in India, is to showcase the country’s toy manufacturing strengths, state by state.

The fair will also provide a national marketing platform to interested MSMEs, entrepreneurs, craftspersons, exporters, startups and other relevant stakeholders. Under this, Indian states with existing and upcoming toy designing, manufacturing and distribution facilities have been invited to highlight their potential by networking and connecting with other industrial players and showcasing their toys to create a truly dynamic ecosystem for both, toy producers and consumers.

The multi-pronged push by the Indian government to expanding both the indigenous toy industry and the role of the toy sector in the economy, is part of a larger goal towards self-reliance by the country.

India’s focus on the design and innovation of toys as well as the promotion of traditional toys highlights the importance of uniting fun with learning. By setting up Special Economic Zones, implementing labour reforms, decentralizing FDI approvals and developing superior manufacturing infrastructure and distribution networks, India is striving to create an enabling environment for major toy manufacturers. These steps will help the toys industry to emerge as an independently robust sector of the Indian economy, capable of generating billions in profit and marking India as an indelible player in global toys manufacturing.

(The writers are researchers, Strategic Investment Research Unit, Invest India. Views expressed are personal)