Indian toy industry hit hard by imports, says study

Toy manufacturers decimated as imports from China flood the market

The Indian toy industry, which largely consists of small and medium enterprises (SMEs), is caught in a strange paradox - it recorded double-digit growth over the last five years, and yet around 40 per cent of Indian toy companies have closed down during this period. A recent study by the Associated Chambers of Commerce and Industry (Assocham) on the Indian toy industry has stated that the Indian market is flooded with Chinese toyimports and that Indian toy manufacturers are being decimated as a result. This phenomenon could well be described as the "dragon effect." The Indian toy industry is a major market for both domestic and international players, owing to low penetration (0.5 per cent) as well as growth in the size of the middle class. India's toy industry has a meagre share of 0.51 per cent of the global market. The Indian toy market, whose size is estimated at about Rs 8,000 crore (as of March 2013), is expected to grow at a compound annual growth rate (CAGR) of 30 per cent by 2015. Only 20 per cent of the Indian market is served by Indian manufacturers, with the rest being accounted for by imports mainly from China and Italy, which offer wider variety at lower prices and attract children of all ages. These imports include fun games, electronic toys, board games, construction toys, stuffed toys, educational games and toy cars, said the study, titled 'Indian Toy Industry - The Current Scenario'. The study further said overall toy imports into India increased at a CAGR of 25.21 per cent between 2001 and 2012. Imports from China and Italy surged at a CAGR of 30 per cent and 38.6 per cent respectively during this period. Nearly 40 per cent of Indian toy makers have already closed down in the last five years and another 20 per cent are on the verge of closure, the study said. The toy industry in India is concentrated mainly in the small and cottage sectors, with about 4,000 manufacturers in all. The worst-hit toy clusters are in Allahabad, Delhi, Kanpur, Lucknow and Patna. About 50 per cent of the toy units are in Delhi-NCR, 35 per cent are in Maharashtra, and the remaining 15 per cent are scattered across the country. The toy industry currently employs a total of around three million people in the organised and unorganised sectors. With robust growth anticipated by 2015, the Assocham study expects employment in the industry to rise to around five million by 2015. While SMEs are being pummelled by Chinese imports within India, made-in-India toys are offering tough competition to Chinese products in the mid- and high-priced segments in both domestic and international markets. Industry experts also say that major global buyers have slowly begun looking towards India. K John Baby, chief executive officer of Funskool (India) Ltd, a joint venture between tyre major MRF and Hasbro, said that since the cost of labour is going up in China, there are clear signs that customers are now

looking at India. "Our only problem is manufacturing capacity. Today Chinese manufacturers are able to consolidate their production and send it to different customers in a single container in a particular country, which we are not able to," noted Baby. Funskool manufactures and supplies toys to some of the largest global toy companies, such as Hasbro, Lego, Tomy Takara, Raven-zburger, Walt Disney, Warner Bros and Nickelodeon. Funskool's own brand is now competing with Chinese products in the UK market, and will soon take on the competition in the African countries.