The global toy industry is witnessing a significant shift from China to India, attributed to various factors including regulatory requirements, protectionism, and strategic business decisions by major players. This shift has resulted in substantial growth in India’s toy exports and a decline in imports, positioning the country as a net exporter. Amid a global shift from China, India's toy exports soared by 239%, buoyed by BIS standards, protectionism, and increased customs duties. Major brands like Hasbro favor Indian sourcing.
The toy industry's shift from China to India could be influenced by several factors, including economic, geopolitical, and industrial considerations. Here are some reasons why such a shift might occur:
Cost Considerations: Rising labor costs in China have made manufacturing in the country less cost-effective, prompting companies to seek alternative production locations. India, with its lower labor costs compared to China, could become an attractive destination for toy manufacturing.
Trade Tensions: Trade tensions between China and major trading partners, such as the United States, have led companies to diversify their manufacturing bases to mitigate risks associated with tariffs and trade disputes. India could be seen as a viable alternative to China for companies looking to relocate their production facilities.
Government Incentives: The Indian government may offer incentives, such as tax breaks, subsidies, or other benefits, to attract foreign investment and promote domestic manufacturing, including in the toy industry. These incentives could make India a more appealing destination for companies seeking to relocate their operations.
Market Access: India's large and growing consumer market presents significant opportunities for companies in the toy industry. By manufacturing in India, companies can potentially gain better access to the Indian market and tap into its growing consumer base.
Geopolitical Considerations: Companies may also consider geopolitical factors when making decisions about manufacturing locations. India's relatively stable political environment and growing strategic importance could make it a preferred choice for companies looking to diversify their supply chains away from China.
Infrastructure Development: India has been investing in infrastructure development, including transportation networks and industrial zones, which can improve the logistics and supply chain efficiency for manufacturing operations. Improved infrastructure could make India a more attractive manufacturing destination for the toy industry.
Skilled Workforce: India has a large pool of skilled and semi-skilled workers, particularly in sectors like engineering and manufacturing. Access to a skilled workforce can be a crucial factor for companies considering relocation or expansion of manufacturing operations.
Environmental Regulations: Increasing environmental regulations in China, aimed at reducing pollution and improving environmental sustainability, may also drive companies to consider relocating manufacturing operations to countries with less stringent regulations, such as India.
Overall, while there are compelling reasons for the toy industry to shift manufacturing from China to India, it's important to consider various factors, including labor availability, infrastructure, regulatory environment, and market access, before making such a decision. Additionally, the pace and extent of the shift will depend on the specific circumstances and priorities of individual companies.
Factors Driving the Shift-
India’s toy exports and a decline in imports, position the country as a net exporter.
1. Bureau of Indian Standards (BIS) Approval Requirement:
The mandatory BIS approval for toy sales in India has incentivized global toy majors to focus sourcing efforts towards India.
This regulatory requirement ensures quality control and consumer safety standards, bolstering confidence in Indian toy exports.
2. Increased Customs Duty:
The escalation of basic customs duty on toys from 20% to 70% by the Indian government has incentivized domestic production and reduced reliance on imports.
This policy measure aims to bolster the competitiveness of the Indian toy industry and foster its growth trajectory.
3. Protectionism and Trade Policies:
India’s implementation of protectionist measures, such as increased customs duties on toy imports, has encouraged global manufacturers to explore alternative sourcing destinations.
The “China-Plus-One” strategy adopted by businesses seeking diversification from China has further propelled India’s emergence as a preferred manufacturing hub.
Key Industry Players and Market Expansion
1. Dependence of Global Brands:
Leading toy brands like Hasbro, Mattel, and Spin Master are increasingly relying on India for sourcing, indicating a shift in manufacturing bases.
This dependency underscores India’s growing importance as a strategic manufacturing partner for global toy companies.
2. Transition of Major Manufacturers:
Notable manufacturers such as Dream plast, Micro-plast, and Incas are gradually transitioning their focus from China to India. Expansion of production capacities and export markets, facilitated by government policies and regulatory compliance, underscores India’s attractiveness as a manufacturing destination.
Challenges and Industry Perspectives
1. Need for BIS Rule Relaxation:
The Toy Association of India (TAI) advocates for further relaxation of BIS rules to support micro, small, and medium enterprises (MSMEs) in the toy sector. Despite government efforts to promote manufacturing, challenges persist for smaller players, necessitating policy adjustments to foster a more conducive environment.
2. Emergence of Toy Manufacturing Hubs:
Gujarat is emerging as a prominent toy manufacturing hub, reflecting the geographical diversification of India’s manufacturing landscape. The proliferation of startups in the toy industry signifies the growing entrepreneurial ecosystem and potential for regional specialization.
Market Projections and Growth Trajectory
According to a report by market research firm IMARC, the toy industry in India was valued at $1.7 billion in 2023 and is projected to reach $4.4 billion by 2032, exhibiting a robust growth rate of 10.6% according to a report by market research. Between 2014-15 and 2022-23, India's toy exports increased 239% and imports declined 52%. This trajectory underscores the transformative shift and promising prospects for India’s toy manufacturing sector.
A Comparison between India and China by Economy
India and China are two of the world's largest and fastest-growing economies, but they differ in various aspects:
Size and Growth Rate:
China and India are the two fastest emerging economies in the world. China has a larger economy than India in terms of Gross Domestic Product (GDP). As of recent data, China's GDP is significantly larger than India's. While both countries have been experiencing rapid economic growth over the past few decades, China's growth rate has been consistently higher than India's. However, India has been catching up in recent years. As of 2023, China and India are the 2nd and 5th largest economies in the world, respectively, on a nominal basis. On a PPP basis, China is at 1st, and India is at 3rd place. Both countries share 20.51% and 26.32% of the total global wealth in nominal and PPP terms, respectively. Among Asian countries, China and India together contribute more than half of Asia's GDP.
In 1988, the GDP (Nominal) of both countries was almost equal; even in PPP terms, China was slightly ahead of India in 1990. Now in 2023, China's GDP is 4.74 times higher than India. On a PPP basis, the GDP of China is 2.51x of India. China crossed the $1 trillion mark in 1998, while India crossed nine years later in 2007 on an exchange rate basis.
Both countries have been neck-to-neck in GDP per capita terms till 1991. As per both methods, India was richer than China in 1990. In 2023, China is almost 4.8 times richer than India on the nominal and 2.54 times richer in the PPP method. The per capita rank of China and India is 75th and 143th, resp, in nominal. The per capita rank of China and India is 77th and 131th, resp, in PPP.
China attains a maximum GDP growth rate of 19.30% in 1970 and a minimum of -27.27% in 1961. India reached an all-time high of 9.63% in 1988 and a record low of -5.83% in 2020. From 1961 to 2022, China grew by more than 10% in 22 years while India never. GDP growth rate was negative in five years for both China and India.
Economic Structure:
China's economy is largely driven by manufacturing and exports. It has been dubbed the "world's factory" due to its extensive manufacturing capabilities. India's economy is more diverse, with significant contributions from services, agriculture, and industry. The service sector, including IT, telecommunications, and finance, plays a prominent role in India's economy.
Foreign Investment and Trade:
China has been a global manufacturing hub for several decades and attracts significant foreign direct investment (FDI) due to its large market, infrastructure, and relatively low labor costs. India has been gradually opening up its economy to foreign investment and has seen growth in sectors such as IT, pharmaceuticals, and services. However, bureaucratic hurdles and infrastructure limitations have sometimes deterred foreign investment.
Demographics:
China's population is ageing rapidly due to its one-child policy, which was in effect for several decades. This poses challenges for its labor force and social security systems.
India has a younger population, with a large proportion under the age of 30. This demographic dividend presents opportunities for economic growth, provided there are adequate education and employment opportunities.
Infrastructure:
China has invested heavily in infrastructure development, including transportation, energy, and telecommunications, which has been crucial in supporting its economic growth. India's infrastructure, while improving, still faces challenges such as inadequate transportation networks, power shortages, and digital divide. Addressing these infrastructure gaps is essential for sustaining economic growth.
Government Policies:
Both countries have different economic systems and policy approaches. China has a socialist market economy with significant government intervention and control, whereas India follows a mixed economy with elements of both socialism and capitalism. China's government has implemented long-term economic plans and industrial policies aimed at achieving specific economic goals, often with centralized control.
India has been gradually liberalizing its economy since the early 1990s, with reforms aimed at reducing government intervention, promoting private sector participation, and integrating with the global economy.
In summary, while both India and China are major players in the global economy, they differ in terms of economic structure, growth drivers, demographics, government policies, and infrastructure. Understanding these differences is crucial for analyzing their respective economic trajectories and potential future developments.
