India’s toy industry: Down but not out

 Purba Das | @TheDollarBiz

Electronic toys, mostly from China, now account for around 50% of the total toy market in India

  Over 10,000 visitors and more than 100 toy manufacturers exhibited their products in the recently concluded 8th Toy Biz International Fair, organised by Toy Association of India (TAI), at New Delhi. However, the enthusiasm seen at the fair failed to veil the grim situation India’s toy industry is in. The words of Raj Kumar, President, TAI, sums it up directly, point blank. He told The Dollar Business, “The focus of the fair is not to compete with Chinese toys. Our main aim is to fulfil the needs of Indian children; to create toys that can be used for their development and education." Like several other sectors, India’s ailing toy industry is facing tough times due to the influx of Chinese products helped by low labour costs and modern technology in China. According to an Assocham report, the penetration of Chinese toy products in the Indian market has forced nearly 40% of Indian toy companies to shutdown in the last five years, and around 20% of toy manufacturers are on the brink of collapse. “Only 20% of the Indian market is served by Indian manufacturers and rest by import of toys from different countries mainly from China and Italy,” says D.S. Rawat, Secretary General of Assocham. Industry experts attribute this worrying trend to the lack of easy availability of credit, upgraded technology and raw materials. Manu Gupta, Director, Playgro India Private Limited, says that easy availability of credit is a major issue that the industry is facing. “Lack of financial resources does not allow many manufacturers to upgrade their technology or source quality raw materials, which impacts the business while Chinese products are priced competitively in the Indian market,” he told The Dollar Business. Apart from price, the toy industry in India lags behind China in the manufacturing of electronic toys which now account for around 50% of the total toy market in India. Experts say lack of research and development has given Chinese toy manufacturers an edge in the Indian market. “A lot of manufacturers continue making traditional toys while the market has moved ahead. Electronic and battery operated toys and games are still not manufactured in India at a large scale and hence are being imported from China,” says Neeraj Dhamija, Managing Director of Toyson India. But the industry is resilient and may surprise the sceptics. Industry players say a transition is on and the times are changing for the Indian toy industry. Amarjit Singh, Partner, Amardeep & Co., says that a pointer in this direction is that Indian manufacturers are increasingly realizing the importance of innovation. “Many players are now getting into the research and development aspect of the industry and are emphasizing on the need for innovations in the product,” he told The Dollar Business. Plus, changes in China are also likely to tilt the balance in India’s favour not just within the country but also in the global market. Rising labour costs in China are attracting many Western toy companies to look at Indian manufacturers for producing toys. “This is good news for the industry,” Amarjit Singh adds. The industry is also looking at new markets for growth in exports and is focusing on markets such as Africa, the Middle East and SAARC countries which includes growing markets such as Bangladesh, Sri Lanka and Myanmar. This is a marked move away from India’s traditional markets such as UK, Mexico, and Singapore. Currently, the Indian toy industry is pegged at around Rs. 8,000 crore and is growing at 20% CAGR per year. The industry is expected to touch Rs. 13,000 crore by 2015. Industry representatives say that gaining access to newer markets and interest of global players to invest in India may help meet or exceed the target.