The Toy Story in India: Understanding India’s Booming Toy Retail Market

Toys have always been an important aspect of childhood, and there is a broad and culturally rich history of traditional toys in India. With the expansion of the Indian economy, the toy retail industry in India has seen substantial growth throughout the years. The Indian toy market was valued at US$ 1.5 billion in 2022, and it is expected to reach US$ 3 billion by 2028, rising at a CAGR of 12.2% between 2023 and 2028. Factors driving growth include rising earnings, an increase in the number of children, a growing middle class, and an increased understanding of the role of play in child development.

The government has taken many initiatives to prohibit the import of substandard and hazardous toys and to boost the domestic toy industry. As a result of several government initiatives, the volume of toys imported into the Indian market has been steadily reducing. Toy imports to India (HSN Codes 9503, 9504, 9505) have declined from US$ 332.55 million in 2014-15 to US$ 109.72 million in 2021-22, a 67% decrease. Furthermore, exports of Toys (HSN Codes 9503, 9504, 9505) from India have surged from US$ 96.17 million in 2014-15 to US$ 326.63 million in 2021-22, a 240% increase.

The Toy Industry in India

With changes in technology, culture, and economic situations, the industry has changed, and children in India nowadays have access to a wide range of toys that reflect both local and international influences. With the expansion of international trade and globalisation in the 20th century, imported toys such as plastic toys, action figures, and board games were more widely available. With the rise of the Indian economy in the early 2000s, local establishments such as Funskool created and manufactured a variety of toys. With the advancement of technology, electronic toys such as robots, interactive games, and remote-controlled toys have become popular.

In recent years, there has been a surge in interest in educational toys in India. Toys such as science kits and coding games are being developed to help youngsters learn abilities like problem-solving, creativity, and critical thinking. This shift in the country's toy retail industry has seen new players enter the market, incumbent merchants increase their products, and internet sales channels gain traction. While there are many artisans, craftspeople, and small enterprises engaging in this shift, the toy retail sector is currently dominated by both global and domestic players. The toy industry is currently highly fragmented, with only a few significant players and several SMEs and MSMEs. Mattel, Hasbro, Lego, and Bandai Namco are some of the major global players. Funskool, Hamleys, and Playgro Toys India are examples of domestic competitors. These businesses are growing their reach by boosting their product offers, opening more storefronts, and investigating internet sales methods.

Growth of the Toy Retail Sector

• Increasing Number of Children

According to the United Nations, India has the most children aged 0 to 14, with over 300 million. By 2036, the country is expected to have 17% of the global child population. As a result, the demand for toys is expected to rise in the coming years.

• Rising Disposable Income

As 140 million households enter the middle class and another 20 million in the high-income bracket, consumption in all categories will rise; parents will be able to spend more money on toys for their children. This trend is projected to continue as the country's middle class grows.

• Others

The increased awareness of toys has a positive effect on child development, the growth of e-commerce as a sales channel, the veteran artisans of India and their toy legacy dating back over 5000 years.

Traditional toys of India

• Channapatna (Karnataka): Wooden toys made of ivory wood.
• Kondapalli (Andhra Pradesh): Wooden toys manufactured from softwood called Tella Poniki in the Krishna district.
• Etikapokka (Andhra Pradesh): Wooden and lacquer toys manufactured in the Vishakhapatnam district.
• Natungram dolls (West Bengal): Wooden dolls manufactured in the Purba Burdwan district.
• Thigda Dingla (Gujarat): These are dolls created from rag fabrics by women from Kutcch households.
• Choppu Saman (Tamil Nadu): These tiny toys resemble miniature kitchen tools made of eucalyptus wood and have bright, polished edges.
• Sikki toys (Bihar): These are handicrafts created from Sikki or Golden grass, which is found in the Madhubani district.
• Sawantwadi (Maharashtra): These are handcrafted wooden toys manufactured by residents of the Sindhudurg district.
• Other well-known Indian toys include Thanjavur dancing dolls (Tamil Nadu), Nirmal soft wood toys (Telengana), Madhya Pradesh lacquer toys, Galar Putul and Babu Putul from West Bengal, and wooden toys from Varanasi (Uttar Pradesh).

Government Initiatives

• Production Linked Incentive (PLI) scheme for toys

The Indian government is devising a Production Linked Incentive (PLI) scheme of US$ 426.50 billion (Rs. 3,500 crore) to encourage the domestic production of toys that adhere to Bureau of Indian Standards (BIS) standards. The government is anticipated to incentivize toys made with imported parts because many toy components, such as electronic circuits and cloth used in soft toys, are not currently manufactured in India. The idea is anticipated to be implemented during the upcoming budget meeting for fiscal year 24. The scheme will only apply to finished toys only, and not toy components. The PLI scheme will aid in the development of an ecosystem for the toy manufacturing sector, allowing the production of high-quality toys for domestic and global markets. The plan is also to reduce imports of dangerous toys from China while increasing domestic manufacturing capacity. According to data, the value of toys imported by India plummeted from US$ 371 million in FY19 to US$ 110 million in FY22, a drop of more than 70%.

• National Action Plan for Toys

In order to encourage the design of toys based on Indian values, culture, and history, to use toys as a learning resource, to organise hackathons and grand challenges for toy designing and manufacturing, to monitor toy quality, to restrict imports of sub-standard and unsafe toys, to promote indigenous toy clusters, to boost local manufacturing, and to incentivize toy manufacturers, and more.

• Ministry of Textiles has identified 13 toy clusters across the country for the overall development of toy artisans as under

Source: Ministry of Commerce & Industry

• Others
  • BIS has issued 1097 licences to domestic toy producers (out of which 1061 licences (96.7%) have been granted to MSMEs) and 28 licences to foreign manufacturers for the production of toys displaying BIS standard marks.
  • In February 2020, the Basic Customs Duty (BCD) on toys (HS code 9503) was raised from 20% to 60%.
  • The Department for Promotion of Industry and Internal Trade (DPIIT) issued a quality control order for toys on February 25, 2020, bringing toys under compulsory certification from the Bureau of Indian Standards (BIS) as of January 1, 2021.
  • To prevent the importation of substandard toys, the DGFT has mandated sample testing of each import consignment.
  • BIS notified special measures in December 2020, in order to grant licences to micro-scale units making toys without testing facilities for one year and without constructing in-house testing facilities.
  • In December 2020, the Quality Control Order for Toys was amended to exempt goods and articles manufactured and sold by artisans registered with the Development Commissioner, Ministry of Textiles, as well as registered proprietors and authorised users of a product registered as Geographical Indication by the Office of the Controller General of Patents, Designs, and Trademarks.
  • Under the Scheme of Funds for Regeneration of Traditional Industries (SFURTI), a total of 19 Toy Clusters have been approved, benefiting 11,749 artisans with a financial outlay of US$ 6.78 million (Rs. 55.65 crore). Nine of these 19 clusters have been approved in Madhya Pradesh, three in Rajasthan, two in Uttar Pradesh, two in Karnataka, and one each in Andhra Pradesh, Maharashtra, and Tamil Nadu.
  • DPIIT organised the 'Toy Business League' on the 4th and 5th of January 2022 to facilitate a meaningful dialogue between innovators and toy manufacturers in order to create collaboration opportunities for Toycathon 2021 winners and to realise the vision of designing toys based on Indian values, culture, and history.
  • Play and activity-based learning are emphasised in the National Education Policy 2020 developed by the Ministry of Education. NCERT has published a guidebook on 'Toy Based Pedagogy' with the goal of making children's learning interesting and enjoyable. It recommends toys, particularly those based on India's vast wealth of indigenous toys and games, to be utilised at various times to help young children develop several competencies. Furthermore, to support the expansion of the toy sector in India, the NEP asks for the formulation of a new national toy policy that intends to create a favourable environment by promoting the design, development, and production of toys in India.
  • In 2019, the government of India relaxed local sourcing criteria under the FDI policy's single brand retail trading (SBRT) rules in order to encourage corporations to source for their global and Indian operations. This decision has created an excellent opportunity for corporations to consider India as a sourcing destination in addition to the progressive retail opportunities it offers. Additionally, under the automatic route, the policy allows 100% FDI in SBRT.
  • The Government of India has signed a Comprehensive Economic Partnership Agreement (CEPA) with the United Arab Emirates (UAE). Under this arrangement, the UAE gives zero-duty market access to Indian toy exporters. CEPA will come into effect on May 1, 2022.
  • India's government has signed an Economic Cooperation and Trade Agreement (ECTA) with Australia. Australia gives zero-duty market access for Indian toy exports under this arrangement. The ECTA will go into effect on December 29, 2022.

  Road Ahead

  The toy retail industry in India has seen substantial expansion in recent years, due to government support. However, the industry must keep growing and evolving in order to realise its full potential. Players in India can focus on generating distinctive items that meet the needs of local consumers. Retailers can also expand their distribution network by developing partnerships with other stores and online marketplaces to boost reach and accessibility. To encourage the use of toys in play-based learning, the government and businesses can work with educational institutions. This collaboration can even include providing instructors with play-based learning training. The importance of play in child development can be emphasised for parents and caregivers by including toys with educational resources. Overall, business and government collaboration can ensure that India's toy retail industry thrives and meets customer needs.