It is heartening to know that a performance-linked incentive (PLI) scheme for toys is on the anvil as indicated by the recent Budget. However, before the approval is made for the PLI, policymakers should note the complex nature of this industry.

The toy sector has an extremely segmented market, driven by the varied nature of the toys produced as well as the longevity of the product for the end-user. Therefore, the requirements of different segments vary in terms of production process, raw materials, employment intensity and skills, to name a few. In terms of the end-use itself, there are many categories of toys — electronic and non-electronic; modern and traditional; plastic and non-plastic; education and non-educational toys; age group-wise, etc. Although reduction in cost of production is a common objective for any entrepreneur, access to cheaper and domestically manufactured raw materials to make quality toys at competitive prices remains unaddressed.

For crucial ingredients like electronic parts, certain grades of plastics, plastic parts and fabrics, India is still dependent on China and Asean countries. Indian toy-makers are still importing moulding, fabric quality testing and cutting, sewing and embroidery machines. If the crucial raw materials and machinery for toy making are aligned with the proposed PLI scheme, the supply chain can be strengthened in the future. And Indian toy manufacturers could be put on a higher pedestal in the global market.

Segmented market

The Indian toy market is highly segmented. One category of manufacturers caters only to the domestic market, producing niche products influenced by Indian ethics and values, for which raw materials are sourced locally. These manufacturers are characterised by very small scale, limited investments and high precision hand-craft. The other extreme are manufacturers producing solely for exports, which involve big investments, bigger scales of production, but are very few in numbers in India. The third category is a set of small and medium enterprises catering to both domestic and global markets.

The first and third categories account for about 90 per cent of the entire gamut of the toy sector in India. In an on-going study on the toy sector by the Institute for Studies in Industrial Development, it was noted that a very small share of big firms in India are able to contribute a large share to the total manufacturing GVA vis-a-vis the MSME firms that are predominant in toy manufacturing.

However, there are many common concerns across the sector that policymakers need to consider. First is the missing pool of skilled manpower available for the industry. The requirements of skill vary from the precision of hand-made toys to skilled cutting and tailoring needs. The nature of this industry has changed over the last few decades which entails a gamut of new skills that are still lacking in India.

Second, appropriate systems are not in place to provide an ecosystem for manufacturing good quality toys. Each type of toy has a specific testing procedure which could be costly for small manufacturers to own and use on an individual basis.

Aligned with this is the need for a network of institutions that could provide research and design support to the industry. To cater to the needs of growing minds, inputs from design and technology institutes should be available.

Finally, the toy cluster development schemes should set up a “plug-n-play” system that goes a long way in reducing production costs, rather than allotting land alone. The government must ensure that land allotment under toy clusters translate into manufacturing hubs with higher scales of production.

A PLI scheme for toy sector should recognise the needs of all segments of the industry and include all stages of production to strengthen supply chains. A sector which is predominated by MSMEs should be accorded a different treatment by policymakers. If the intention of the government is to unleash the growth potential of the toy sector, the approach towards toy manufacturing should be PLI-plus in nature.

The writer is Assistant Professor, Institute for Studies in Industrial Development