Gifts / Sports & Toys

In order to "replace China", India has been making great efforts. After using a combination of "tax increase" and "compulsory certification" to restrict the import of Chinese toys and build a manufacturing cluster at home, India will recently use its "cash" ability: launch a "10 billion" subsidy to local small and medium-sized toy enterprises to "transfuse blood", Huacheng Import and Export Data Observation reported.

"10 billion subsidy" for small and micro enterprises in India

To "challenge" China, we should start from the domestic market, especially a large number of small and micro enterprises. As a result, there is the "Production linked Incentive" policy, or PLI plan for short, that the Indian government will soon introduce.

According to the Huacheng Import and Export Data Observation Report, for the toy industry, the Indian government is planning to provide subsidies of about INR 35 billion (about 3 billion yuan, US $424 million) for toys that meet the specifications of the Bureau of Indian Standards (BIS), aiming to reduce imports of toys that do not meet the requirements of BIS from China, and support the development of domestic toy manufacturing industry, especially small and micro enterprises. The plan will last for five years.

Ajay Aggarwal, chairman of the Toy Association of India, said: "We have organized a committee to consult with the government to determine the final plan of the PLI plan. At present, the plan has entered the late stage of cross ministerial consultations and is expected to start soon.

It started with a "secret spot check" in 2019. At that time, the market inspection conducted by the Indian industry and commerce department found that only 33% of the more than 150 samples met the safety standards of BIS, 45% of plush toys and 25% of electric toys were unqualified, and 66% of them were unqualified in mechanical and chemical properties. Subsequently, the Indian government will increase the tariff of toys from 20% to 60% in February 2020, and implement compulsory BIS certification from January 1, 2021.

The policy effect is remarkable. According to the Huacheng Import and Export Data Observation Report, in the past three years, the import of toys from India has dropped from 371 million dollars in fiscal year 2019 to 110 million dollars in fiscal year 2022, a drop of 70%, while the import of toys from China has dropped to 59 million dollars in the same period, a drop of 80% higher than the industry level. At the same time, India's toy exports increased by 61.4%, reaching 326 million US dollars by the 2022 fiscal year.

As of the beginning of December this year, the Indian government has issued about 1000 BIS licenses, 650-700 of which have been issued to SMEs. There are only 15 large companies with certificates, and the number of certificates is about 35-40.

The subsidy plan has natural defects

Although the PLI plan covers traditional toys and new toys (with mechanical devices), which seems to be very broad, the source pointed out that this measure is only for the toy manufacturing sector, and toy parts do not belong to it.

But the reality is that many of the components required for toy manufacturing are simply not available locally, such as the electronic parts required for manufacturing electric toys, and even the fabric materials required for plush toys are not available, all of which need to be imported.

FunZoo Toys, an Indian toy manufacturer, must import almost all the key electronic components and plush toy fabrics used for battery powered toys from China. Naresh Kumar, its chief executive officer, admitted: "Although India has also started to manufacture fabrics, it cannot compare with the quality and price provided by China."

Manu Gupta, a committee member who negotiated PLI plan with the government on behalf of the Indian Toy Association, pointed out that electronic toys are one of the engines driving the growth of the Indian toy market, but the manufacturing of electronic toys in India is still at the early stage of development, lacking professional knowledge, such as how to manufacture key circuit boards and other auxiliary parts of the toy.

But India's electronic toy supply chain is slowly taking shape. Aequs Toys, one of India's largest toy manufacturers and exporters, has established its own manufacturing chain in Koppal Special Zone. President Amit Chakraborty said, "Koppal Special Zone is like a miniature version of Guangdong, China. Here, we will have our own PCB manufacturing, packaging and hardware sectors, so that we can complete our toy manufacturing in the zone."

However, he also admitted: "China is more advanced in the low-cost electronics industry, which is needed for toy manufacturing and is also lacking in India at present. China has expertise in manufacturing more complex toys, such as plush and plastic combination toys or electromechanical toys. India needs a little time to catch up. If the government continues to restrict imports from China, it will force the development of relevant local industries."

At present, the export growth of Indian toys is mainly driven by plastic toys. Because the labor price in India is one third of that in China, the plastic and plush toys produced in India are cheaper than those in China. In addition, India is vigorously developing toy manufacturing clusters, attracting many international brands and retailers to purchase from India.

The Indian industry is still full of expectations

In recent years, the toy industry has been a prominent link in India's efforts to reduce its dependence on China's imports. The Indian government has implemented various policies to reduce China's toy imports. At the same time, it has taken advantage of the trend of diversified global industrial chain layout in the West to promote the development of local manufacturing industry and participate in international competition. Huacheng Import and Export Data Observation Report.

An Indian official who declined to be named told the media that large transnational toy manufacturers were considering expanding their procurement in India. He said: "Hasbro, an American toy giant, told us that the proportion of their purchases from India was about 10% earlier, but now the proportion has increased to 60%. They hope to increase the proportion to 90%."

The report of KPMG, the world's top accounting professional service agency, predicts that the size of the Indian toy market may double from US $1 billion to US $2 billion in 2024-25. Relevant experts said that the PLI plan is likely to stimulate such growth. It can not only enable manufacturers to increase their production capacity and exports, but also create more employment opportunities.

According to the observation report of Huacheng import and export data, in addition to the toy industry, the Indian government plans to launch PLI plans in 14 key industries in the next five years, with a budget expenditure of 1.97 trillion rupees (about 166.4 billion yuan), to build a national manufacturing leader and create 6 million new jobs.