Kukreja was in a fix as the government had made it mandatory for all toys, manufactured in or imported to India, to comply with the safety norms of the Bureau of Indian Standards (BIS) from September 1. “Every unit was mandated to have a toytesting lab in the factory. I had ordered the equipment needed for BIS certification but there was a delay in shipment,” says Kukreja, CEO of Min Toy and president of The All India Toy Manufacturers Association (TAITMA). He says the BIS issue stalled production at his facility “just as we were reaching 40% manufacturing level of pre-Covid months”.
Now, he can take a breather and his factory can keep churning out pink cars. The government on Tuesday extended the deadline for BIS certification to January 1, 2021. “In the present circumstances, the government has done enough. Now, we have a chance to comply with the norms. But the industry is vast and BIS equipment is not reaching us on time. To avoid closure of small companies, we have suggested a cooperative for such entities so that BIS charges do not weigh them down.”
Like Kukreja, many toymakers feel setting up of labs at every facility is a challenge, especially for small players. “We welcome the extension of deadline but the number of BIS lab equipment must be brought down. The government should allow the setting up of cluster labs where manufacturers of a particular area can go and get their toys tested instead of each manufacturer setting up a lab of their own,” says Rajesh Arora, VP of TAITMA and a partner in Play Craft, which makes about 150 kinds of toys.
The government is clear that safety standards of toys is not to be trifled with. “No import and sale of non-standard toys will be allowed in India,” Consumer Affairs Minister Ram Vilas Paswan told ET Magazine.
According to sources in the Ministry of Consumer Affairs, the Quality Council of India (QCI) found that nearly two-thirds of imported toys had failed safety standard tests, necessitating the order. While the government aims to rein in substandard imports from China and maintain the quality of toys made in India, most industry players ET Magazine spoke to feel BIS certification labs at each unit is not practical as most toy manufacturers in the country are small-scale units.
Industry experts also say the PM’s call to develop India into a toy hub and the commerce ministry’s move to make BIS certification compulsory after it raised import duty for toys in the budget are contradictory. Tarun Dewan, executive director, Sports Goods Export Promotion Council (SGEPC), too, points to the difficulty in implementing BIS in micro and cottage industries and among craftspeople in villages. “BIS may only create problems for traditional toymakers in smaller towns and villages who are already facing hardships due to lockdown. They must be exempted,” says Dewan.
Indian toy industry is fractured, with just 3% of the 4,000-odd manufacturers being large-scale players, according to SGEPC. About 75% are micro units and 22% small and medium enterprises.
India is an old playground of a myriad of toys made from a variety of materials like wood, polymer, cloth, fibre, wood pulp, rubber and metal. Some of the traditional toy manufacturing hubs are Channapatna in Karnataka, Chitrakoot in Uttar Pradesh, Kondapalli in Andhra Pradesh and Budni-Rewa in Madhya Pradesh. The artisans are hard at work, keeping the crafts alive. Till the 1980s, most Indian kids had to be content with the toys made in the country. India met 90% of its toy requirement, with the rest coming from the US, UK, France, Italy, Japan and Germany.
The opening up of the economy in 1991 changed how children played, as it did everything else. Made in China toys began to flood the market. Even as wooden toys remained popular, children were reaching out for mechanised toys, mostly imported from China.
While China became the toy capital of the world, India played catch up with little success. Labour laws, taxation issues, lack of technology and poor government incentives meant no major industrial house ventured into the segment. Compared with China’s end-to-end, integrated manufacturing facilities, India’s small-size factories ensured there were no economies of scale. Today China manufactures almost 75% of the world’s toys.
Post-1991, many Indian manufacturers shut their production units and became traders of imported toys. Kukreja was one of the exceptions. In the name of his company Min Toy, “Min” stands for Made in India.
There are three types of toy dealers in India: indigenous toy manufacturers that operate at low or medium scale; licensed importers or channel distributors of a particular MNC; and traders who go to China, buy in bulk and sell in India. The government wants to clamp down on the last segment as they bring back low-quality and often hazardous toys at low cost.
According to SGEPC, the organised toy industry in India is estimated to be Rs 3,500-4,500 crore. Homegrown toys constitute just around 15%, while 85% are imported toys. And China accounts for 90% of the toys imported to India.
Doubts notwithstanding about India becoming the toy hub of the world, the recent call by the PM to be vocal for local toys has given some hope to the industry.
After all, there is a big domestic market. India is home to 25% of the world’s children aged between 0 and 12, according to the World Bank’s 2019 data. The domestic toy demand is expected to grow at 15-20% CAGR between 2020 and 2025 as against the global average of 5%, according to SGEPC.
But will international toy brands shift their manufacturing base from China to India? It is a big ask, although some are optimistic. “India can be a toy hub, provided the right conditions are given to the industry like flexible labour laws and plug-and-play facilities so that manufacturers do not have to invest a lot in setting up factories,” says Kukreja, describing the toy industry as one of the sunrise sectors that can be a major employment generator as it is highly labour-intensive.
The government reasoned that it had hiked the import duty on toys from 20% to 60% to help local players, but domestic toy makers say it hit their manufacturing plans as they depend on toy parts from China.
The one silver lining is that the manufacturing of toys in certain categories has gone up in India. For instance, import of video game consoles, table or parlour games and bowling alley equipment has slipped from $61.3 million in 2017-18 to $53 million in 2018-19 and $48 million in 2019-20. At the same time, export of this set of toys has risen from $15.68 million in 2017-18 to $19.82 million and $27.42 million in 2019-20, the main markets being the US, UK, West Asia and Germany.
While the rise in customs duty has discouraged imports from China, says Arora of SGEPC, toys by international brands such as Mattel, Lego and Hasbro continue to be imported at high duty as similar products are not made in India.
The growing demand for toys in India is fuelled by the rising disposable income. “But there has been a major shift from traditional and medium- to low-end bat tery-operated toys towards innovative electronic toys, intelligent toys as well as upmarket, plush toys,” says Dewan of SGEPC. For these toys, India is dependent on imports.
Hubs are now emerging in India to tap this rage. A toy manufacturing hub with an investment of Rs 5,000 crore is coming up in Koppal, Karnataka, while another has got the nod in the RIICO industrial area at Khushkhera in Bhiwadi, Rajasthan. These hubs offer financial incentives, efficient logistical network, integrated capabilities and flexibility in employment contracts, taking into consideration the seasonality of toy industry. “The allotment of land is complete, and we expect production to start in about one year,” says Gunjan Krishna, director, Department of Industries & Commerce, Karnataka.
Uttar Pradesh is also planning to wind the toys. “The UP government will soon bring a toy policy and is in the process of developing a Toy City on Yamuna Expressway,” says Navneet Sehgal, additional chief secretary, Department of MSME & Export Promotion, UP.
The Madhya Pradesh government, too, has sprung into action following the PM’s call. “We are going to hold toy manufacturing workshops by master craftspersons at our traditional toy-making hubs of Budni, Sheopur and Rewa. Once the skill upgrade process is complete, we will focus on pushing exports of toys made in Madhya Pradesh,” says Rajeev Sharma, commissioner, Handloom & Handicrafts, and MD of Madhya Pradesh Handloom & Handicraft Development Corporation. Mukhtar Abbas Naqvi, Union minister for minority affairs, offers an assurance to local artisans: “At least 25% of stalls will be for local toy makers in the upcoming Hunar Haats.”
It is not easy for “vocal for local” to translate into action. “The idea is good but the government hasn’t come up with any scheme as of now. We need government incentives and ease of doing business,” says Subhash Garg, president of Toy Association Gurugram (a group of manufacturers and distributors) and a distributor of 45 brands. He points to the closure of several toy dealerships in the region due to the lockdown. “Also, the BIS deadline should have been extended to March 31 as all licensees pay a fee for the entire financial year,” he says.
Local toy makers need to be skilled to think global. Manu Gupta, convenor, technical committee, Toy Association of India, and CEO of one of the largest toy makers Playgro, says lack of R&D, technology and innovation could stop India from achieving its new big goal. “We are building more manual and traditional toys even as they account for just 16% of total toy sales in the world. There’s no toy design institute, our courses have no industry interface. For an industry that thrives on innovation and caters to children with short attention spans, we need cutting-edge technology while harnessing our labour force advantage,” says Gupta.