24 jan India’s booming toy exports

 The truth about India’s booming toy exports

India’s turnaround in the toy trade since 2020-21 is the outcome of rising protectionism

हम कितना व्यापार  किये , और इसका श्रेय किसको  

Between 2014-15 and 2022-23, toy exports increased by 239% and imports declined by 52%

An unpublished case study by the Indian Institute of Management Lucknow (IIM-L), sponsored by the Department for Promotion of Industry and Internal Trade (DPIIT), reportedly credits the export success to various promotional efforts under the aegis of ‘Make in India’, initiated since October 2014.

निर्यात जयादा होने का कारण  

The table (columns 2 and 3) shows net exports (exports minus imports) of toys under HS code 9503 and total toys (HS codes 9503+9504+9505) respectively.

 The trade balance was negative ₹1,500 crore in 2014-15, which turned positive from 2020-21 after a gap of 23 years. 

 The turnaround बदलाव in the labour-intensive industry, at a time when such industries are not doing too well, is indeed credible.

How has it happened?

first being protectionism:

 १ A rise in import duties could reduce the demand for toys.

२  The imposition of non-tariff barriers can shrink supply, raise prices and thus reduce demand. 

३ Alternatively, investment upswing could expand capacity and augment labour productivity to boost competitiveness and exports.

 What does the evidence show?

1 In February 2020, customs duty on toys (HS code 9503) was tripled from 20% to 60%. 

2 Since January 2021, non-tariff barriers (NBTs), namely, quality control order (QCO), and mandatory sample testing of each import consignment were imposed, restricting imports. 

Hence, in 2020-21, imports fell and the net exports turned positive. 

3 Moreover, as this was 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.

4 Hence, not surprisingly, the government further raised the basic customs duty to 70% in March 2023, from 60%, to stem the renewed rise in imports.

What data show

Does improving domestic productive capabilities? 

 1 To answer the question, we have analysed the data from the Annual Survey of Industries (ASI) for 2014-15 to 2019-20. 

2 In 2015–16 (the latest available 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, and produced 77% of the value of output (“India’s Toy Industry: Production and Trade since 2000”, by Abhishek Anand, R. Nagaraj, Naveen Thomas, Economic and Political Weekly, May 6, 2023).

3 During six years since 2014-15, the ASI data in real terms show there is hardly a steady rise in fixed capital per worker and gross value of output. 

4 More seriously, labour productivity has steadily declined from ₹7.5 lakh per worker in 2014-15 to ₹5 lakh in 2019-20 (more recent data unavailable). 

Moreover, export growth during pre- and post-2014-15 are not different. 

Therefore, it is hard to believe that India turning into a net toys exporter could be on account of improved domestic supply and its competitiveness. 

सारांश इसका क्या है सरंक्षणवाद को लेकर 

1 Hence, it can be safely inferred that India’s turnaround in the toy trade since 2020-21 is the outcome of rising protectionism.

2 Protectionism for a limited period — as per the infant industry argument — may enable the domestic industry to make adequate investments, allow for “learning by doing” and enhance productivity to compete globally. 

3 Such 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. 

Is some another reason?

In short, 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. 

Perhaps the 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.

source the hindu