- Prelims: Indian exports, protectionism, Make in India etc
- Mains GS Paper III: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment etc
ARTICLE HIGHLIGHTS
- Between 2014-15 and 2022-23, toy exports increased by 239% and imports declined by 52%, turning India into a net exporter, as reported in a recent official press release.
INSIGHTS ON THE ISSUE
Context
Toy Industry:
- The Indian toy industry is estimated to be valued at approximately 5 billion USD
- Global toy industry is about USD 120 billion, making up around 1 percent of the global market share.
- The toy manufacturers in India are mostly located in NCR, Maharashtra, Karnataka, Tamil Nadu, and clusters across central Indian states.
- The sector is fragmented, where 90 percent of the market is lacking organization, and adding to them are 4,000 toy industry units from the MSMEs.
- The domestic toy demand is forecasted to grow at 10-15% against the global average of 5%
Background:
- Between 2018-19 and 2021-22: Toy exports increased from ₹812 crore to ₹1,237 crore
- Imports declined from ₹2,593 crore to ₹819 crore(official data show).
Promotion of Toy exports:
- Make In India: The achievement is credited to the ‘Make in India’ initiative launched in 2014, and related policies, official press releases claim.
- Mann ki Baat: In 2020, the Prime Minister spoke of promoting toy manufacturing, in ‘Mann ki Baat’.
Study by the Indian Institute of Management Lucknow (IIM-L)(sponsored by the Department for Promotion of Industry and Internal Trade (DPIIT))
- It credits the export success to various promotional efforts under the aegis of ‘Make in India.
- The trade balance was negative ₹1,500 crore in 2014-15, which turned positive from 2020-21 after a gap of 23 years.
How India became net exporter?
- Protectionism: A rise in import duties could reduce the demand for toys.
- The imposition of non-tariff barriers can shrink supply, raise prices and thus reduce demand.
- Investment upswing could expand capacity and augment labour productivity to boost competitiveness and exports.
What does the evidence show?
- In 2020:customs duty on toys (HS code 9503) was tripled from 20% to 60%.
- Since 2021, non-tariff barriers (NBTs), namely, quality control order (QCO), and mandatory sample testing of each import consignment were imposed, restricting imports.
- In 2020-21, imports fell and the net exports turned positive.
- The COVID-19 pandemic times, with disrupted supply chains globally, imports were adversely affected.
- As the global supply chain was restored in 2022-23, net exports were reduced to ₹1,319 crore, from ₹1,614 crore in the previous year (for all toys) as exports moderated and imports spiked.
- The dip in net exports is steeper (31%) for toys under HS code 9503 despite the high import duty, while this dip is more moderate (18%) for all toys.
- The government further raised the basic customs duty to 70% from 60%, to stem the renewed rise in imports.
Annual Survey of Industries (ASI) for 2014-15 to 2019-20:
- In 2015–16(figures combined for the organised and unorganised sectors):
- The factory or organised sector accounted for 1% of the total number of the factories and enterprises
- employed 20% of workers
- used 63% of fixed capital
- produced 77% of the value of output (“India’s Toy Industry: Production and Trade since 2000)
- Since 2014-15, the ASI data shows there is hardly a steady rise in fixed capital per worker and gross value of output.
- The labour productivity has steadily declined from ₹7.5 lakh per worker in 2014-15 to ₹5 lakh in 2019-20 (more recent data unavailable).
- Export growth during pre- and post-2014-15 are not different.
- India’s turnaround in the toy trade since 2020-21 is the outcome of rising protectionism.
Way Forward
- Protectionism needs to be complemented with investment policies, and provision of localised, industry/cluster-specific public infrastructure to stimulate a virtuous circle of expanding domestic capabilities to face international competition.
- The toy industry has turned net exporter since 2020-21:‘Make in India’ policies made it possible, claims an officially sponsored research. Published industry and trade data do not bear out such a proposition.
- Rising tariff and non-tariff barriers have made it possible.
- IIM-L’s study uses different evidence to buttress its contention.
- Considering the divergent findings, the report should be made public in the interest of meaningful policy review and dialogue.
QUESTION FOR PRACTICE
Economic growth in the recent past has been led by an increase in labor activity.” Explain this statement. Suggest the growth pattern that will lead to creation of more jobs without compromising labor productivity. (UPSC 2022) (200 WORDS, 10 MARKS)
