Budget 2021: Would this budget “team up for toys”?

The year 2020 was quite notable for the Indian toy industry as the Prime Minister, Narendra Modi, called upon start-ups and entrepreneurs to “team up for toys.” In tangent with the “Atmanirbhar Bharat” ideology put forth by the PM, he urged the start-ups to be “vocal for local,” and to develop computer games in and based on India.

Ever since the shout-out, the toy industry, the media, the experts, among others, have been guesstimating the success of the idea. While some are worried about setting up toy-testing labs to comply with the latest BIS certification order, others are looking towards Union Budget 2021, which is expected to shed some light on the formulation of a dedicated policy for the sector.

Currently, the Indian toy industry accounts for less than 0.5 per cent of the global demand. The number, however, is considered to be an opportunity rather than a deterring factor and can be encouraging for entrepreneurs. India's toy exports are limited to about USD 100 million. The toy industry in India is primarily an unorganised sector, comprising approximately 4,000 small and medium enterprises. About 85 per cent of toys in the Indian markets are imported, mostly from China, followed by Sri Lanka, Malaysia, Germany, Hong Kong, and the US.

CONSUMER BASE FOR TOYS IN INDIA

With the launch of Toycathon earlier in January 2021, a much-needed boost for the sector to gain a better share in the international market was given. Some of the other growth drivers for the Indian toy industry are India’s rich demography with 26.62 per cent of the population in the 0-14-year (2019) age bracket. So almost one-fourth of the population is the consumer base for the Indian toy market. In addition to the huge consumer group in India, the Indian toy market also works majorly on the ‘nag-factor.’ Since most urban Indian households are shifting towards dual-career ecosystems, with more purchasing power, the parents resort to buying toys to pacify kids.

Almost one-fourth of the population is the consumer base for the Indian toy market

One of the articles on the Trade Promotion Council of India website states the diversity of products available in the toy industry has also fueled consumption. The portfolio of toys in India comprises of three categories:

(a) Best international toy brands – Constituting about 15-20% to India’s market size, these are innovative and high-priced.

(b) India-made brands – Comprising 15-20% of the market, these are simpler and cheaper toys with very simple functionality.

(c) Unbranded cheap imports – They make-up for 60-70% of the Indian toy market. These toys are imported mainly from China. They form the bulk of the unorganised wholesale toy market.

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MUCH-NEEDED ATTENTION

Understandably owing to the demand, Indian markets were flooded with the ‘Made-in-China’ toys. After the PM’s shout-out, however, the Indian buyers are now specifically looking for ‘Made in India’ toys and games.

Swapna Wagh, Founder and Director of Desi Toys, sheds light on how the popularity and the sales of India-made and India-based toys and games went up. She says, “The toy industry as such got the much-needed attention it deserved. Especially the Indian-made toys and games - we did see a demand for our toys going up! Especially through the online channels, because unfortunately due to COVID-19, the offline channels were not open, or the walk-ins were low. (In another trend) we also saw offline channels like the popular toy stores, insisting on keeping the Indian toys and games. We could see the change, not just from the customer’s point of view, but (also) from B2B channels because even they wanted to be a part of this. So yes, we saw a change. I think the sale (of such toys) will further go up in the due course of time because we also have the National Toy Fair which is at the end of February.”

POLICIES MAY FAVOUR MANUFACTURES

While after the initial shout-out to the consumer as well as the retailer, both are keenly looking forward to more ‘Made in India’, most new players, including manufacturers are looking forward to the Budget for come favourable policies to get started. Talking about the expectation from the said reports, Sharad Kapoor, General Secretary, The Toy Association of India, said, “We are hoping that our sector, which was neglected over the years, and is unorganized will get something beneficial out of these policies. We (would) want cheaper loans, for upgrading, getting more machines and plug-and-play systems… (so that) new people can think of starting toy trades.” Kapoor said, “The govt is also talking about the ‘production-based incentive plan.’ (Through which) more units we make, we’ll get more incentive from the government.”

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Having been in the market much before ‘vocal for local’ was introduced, Wagh said, “I think the policies might be majorly focusing on the manufacturing set-up. (It may be) in terms of subsidies - be it land or electricity. The reason why people used to manufacture from China was obviously that it was cost-effective plus the quality was decent. If we have to be ‘Atmanirbhar,’ the government (might) focus on these areas so that it becomes viable for the manufacturers to set-up a business in this category.”

NEED EASE OF APPLICATION

While the Modi government is actively pushing and favouring start-ups, the process of registration and other formalities remain to be simplified. The toy sector welcomed mandatory BIS certification for toys last year. Though the process of registration and application for the same might be a little troubling, considering most players in this market are from the unorganised sector who might not have enough knowledge about the process or the resources to go through it.

To this Kapoor said, “Process of registration and application of the BIS certification should be further simplified. (So that) very small unorganized people can apply for the same and upgrade.”

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Wagh also mentioned, “We’ve (also) put forward our recommendations to the government through The Toy Association of India saying that the registration charges or the annual fees should be subsidised considering that there are a lot of unorganised players in toys (sector)… So (maybe) give them subsidies or make it free for them and ease the registration charges, etc.”

A BENEFIT TO THE MANUFACTURERS, THUS TO THE END-CUSTOMER

The end goal, however, being the comfort and quality for the customer, Wagh further added that all the policies that might be announced in the upcoming Budget, would help the manufacturers and thereby the end-customer. She said, “They’ve also come up with this BIS Standard for the toys and games, so that is also going to help a lot in ensuring that the customer benefits from all this. So, if (it is) ensured that these standards are set not just for the international brands, but also for domestic brands, invariably everyone is going to benefit from it. I think that was a great move.”

The Indian toy market which has the potential to become a major contributor not only to the country’s GDP, but also a big player in the international market is favourably being supported by the Modi government. It is, however, yet to be seen what and how the policies will be formulated to promote the industry and make it attractive enough for upcoming entrepreneurs. Considering the reports that this year’s Union Budget may announce formulation of policies for the said market, the toy industry and all its players are keenly looking forward to Feb 1 and so are we!