GS Paper 3
Syllabus: Effects of Liberalisation on the Economy, Changes in Industrial Policy and Their Effects on Industrial Growth
Source: TH
Context: India has recently turned a net exporter of toys (in 2020-21 and 2021-22), ending decades of import dominance.
An overview of the Indian toy industry:
- In 2015-16, the industry had about 15,000 enterprises (in both organised and unorganised sectors), producing toys worth ₹1,688 crores and employing 35,000 workers.
- Registered factories (employing 10 or more workers) accounted for 1% of the number of factories and enterprises, employed 20% of workers, and produced 77% of the value of output.
- Between 2000 and 2016, industry output was halved in real terms (net of inflation) with job losses.
- Imports rose by nearly three times as much as exports and accounted for up to 80% of domestic sales.
- India hardly figures in the global toy trade, with its exports at a mere half a percentage point.
- Between 2014-19, the Indian toy industry witnessed negative productivity growth.
Evolution of the Indian toy industry:
- Asia’s successful industrialising nations promoted toy exports for job creation, starting with Japan (a century ago), China (since the 1980s) and currently Vietnam.
- However, India followed an inward-oriented industrial policy in the Planning era. This sheltered domestic production through import tariffs and reservation policy.
- Thus, toy manufacturing remained stagnant, archaic and fragmented in India.
- With the LPG reforms in India in the 1990s, new firms entered the organised toy manufacturing sector and productivity growth improved.
- Despite early positive trends, industry de-reservation failed to sustain output, investment, and productivity growth after 2007-08.
Recent data related to toy trade in India:
- Toy exports increased from $109 million (₹812 crore) to $177 million (₹1,237 crore) between 2018-19 and 2021-22.
- Imports declined from $371 million (₹2,593 crore) to $110 million (₹819 crore).
The achievement is widely credited to:
- The ‘Make in India’ initiative launched in 2014.
- Basic custom duty on toys tripled from 20% to 60% in 2020.
- Numerous non-tariff barriers (such as production registration orders and safety regulation codes) were imposed as well.
Challenges:
- The potential for sustaining net exports appears slim as the industry has hardly made sustained investments to boost output and exports.
- Rise in protectionism, COVID-19 pandemic.
Way ahead: Examine the ground reality of industrial locations and clusters to tailor policies and institutions to nurture the labour-intensive toy industry in India.
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