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RESEARCH STUDY ON PRODUCTIVITY & COMPETITIVENESS OF TOY MANUFACTURING SECTOR IN INDIA SPONSORED BY DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION (DIPP) MINISTRY OF COMMERCE & INDUSTRY GOVERNMENT OF INDIA PREPARED BY ECONOMIC SERVICES GROUP NATIONAL PRODUCTIVITY COUNCIL NEW DELHI SEPTEMBER 2017 CONTENTS Page Nos. CHAPTER 1 INRODUCTION 1-5 CHAPTER 2 STRUCTURE OF INDIAN TOY 6-22 INDUSTRY CHAPTER 3 PRODUCTIVITY AND GROWTH 23-26 OF REGISTERED TOY MANUFACTURING SECTOR CHAPTER 4 GLOBAL TOY MARKET AND 27-37 INDIA CHAPTER 5 TOY INDUSTRY IN CHINA 38-48 CHAPTER 6 SWOT ANALYSIS OF INDIAN TOY 49-50 INDUSTRY CHAPTER 7 TOXICITY AND SAFETY OF TOYS 51-59 CHAPTER 8 FIELD SURVEY FINDINGS: TOY 60-75 MANUFACTURING UNITS CHAPTER 9 CONCERNS OF THE INDIAN TOY 76-85 INDUSTRY CHAPTER 10 SUMMARY, RECOMMENDATIONS 86-89 AND WAY FORWARD Annexure 1.1. Survey Questionnaire for Toy 90-85 Manufacturing Sector: Company/Manufacturing Unit: Modern Toy Sector Annexure 1.2. Survey Questionnaire for Toy 95-98 Manufacturing Sector: Company/Manufacturing Unit: Traditional Toy Sector Research Study on Productivity & Competitiveness of Toy Manufacturing Sector in India CHAPTER 1 INTRODUCTION 1.1 Background Toys play an important role as cultural ambassadors reflecting 5000 years of Indian civilization. Toys manufactured across the country reflect the cultural diversity of the country. India produces a wide range of Toys viz., plastic, mechanical, soft/plush dolls & animals, board games, puzzles, educational games, metal and tin, wood, Battery operated pullback Toys etc. Indian toys are made from diverse raw materials like, plastic, wood, rubber, metal, textiles etc. Toy Industry in India has witnessed a lot of changes over the last decade in terms of categories of toys, innovation, eye-catching design and other aspects. Traditionally, Toy sector is a labor intensive industry; it provides tremendous employment opportunities to over 3 million workers of which women constitute about 70 percent of workers. The toy industry is mainly based in small and cottage sectors, with about 4000 manufacturing units comprising of micro (75%), small and medium (22%) and large (3%) units. The toy manufacturers are mostly located in Delhi, Mumbai, and Punjab, Uttar Pradesh, Haryana, Tamil Nadu and clusters across central Indian states. Manufacturing of toys in India utilize local skills of master craftsmen and creative designing. Indian toy industry comprises of large number of indigenous manufacturers and a few leading global companies. The toy market has two broad segments such as the “organized” segment, which represents about one-third of the market, and the “unorganized” segment. Mom-and-Pop shops (also known as “Kirana”) are mainly “unorganized” outside the main urban centers, and predominantly operate on a cash-and-carry basis. The size of Indian Toy industry is about Rs.8000 crores of which Rs.3000 crores accounted for by organized sector whereas about Rs.5000 crores accounted by the unorganized sector. The “organized” sector stores are available in big cities – mainly toy specialty stores such as RCS in New Delhi, Hamleys in Mumbai or Prijanka in Hyderabad. Some large MNC toy manufacturing units like Mattel and Funskool have their presence at major cities in India. Funskool is the largest toy manufacturer in India with 30% share, followed by Mattel (20%), Hasbro (9%), Bandai (4%) and Lego (4%) and Leap Frog (3%) and the others accounts for about 30%. The Indian toy industry has shown tremendous growth and expansion potential in the domestic market that is estimated at about US $850 million and it generated 0.5 percent of the global market. The growing awareness among parents in India coupled with increasing personal disposable income led to the growth of toy market and particularly for educational toys and games that offer creativity and lead to the development of the brain of the child. Besides, there is huge demand of Toys under literacy program such as Sarva Shiksha Abhiyan run by Government of India. According to Euro monitor study, spending on toys and games in India is set to grow at 157% between 2009 and 2014, much faster than other Asian countries such as China (84%), Taiwan (35%), South Korea (33.1%) and Singapore (17.2%). Indian parents spend an average of Rs National Productivity Council, New Delhi Page 1 Research Study on Productivity & Competitiveness of Toy Manufacturing Sector in India 250-300 on a toy and this is going up with more and more innovation-driven high-end toys and games - from high-priced board games and play games to BeyBlades and remote- controlled planes -enter the market. Internet retailing is becoming a more and more important distribution channel due to several reasons. Consumers have increasing access to the internet and online retailers often have better merchandise in terms of variety, new launches and offer of branded toys. Though the online toy market represents a mere 5%, it is growing rapidly and is unlikely to have a major influence on the overall demand in the next couple of years. India is producing quality toys, which is unmatched elsewhere and therefore, the demand for Indian toys is rising by leaps and bounds. Dynamics of toy industry changed with the opening of the market for Chinese players. Chinese toys are destroying the Indian toy industry and small and medium manufacturers are almost on the verge of collapse due to severe comptetition. Indian toy industry is much backward in comparison to China’s toy industry. Capitalizing on the advantage of the raw materials and cost of labor, China has become the largest manufacturer and exporter of toys in the world. It is estimated that about 85% of toys worldwide is produced in China. According to China Toy and Juvenile Product Association, China’s toy exports totaled US$ 15.7 billion in 2015. According to industry body ASSOCHAM, spiraling exports have also decimated India’s domestic toy manufacturers. In the last 4-5 years, 40% of Indian toy companies have shutdown and another 20% are on the verge of closure. In terms of pricing, there is a huge gap between locally-made toys and international brand name toys. As such, locally-made toys still maintain a strong edge in the medium to low end segments of the market and practically monopolize sales channels like the wholesale market and individually-run retailers. Among the local manufacturers in India about 59% are still focusing on the production of cheap and unbranded toys which appeals to the price-sensitive Indian consumers. In the future it is expected that these companies will shift towards branded toys as well to stay competitive with international companies. With the lowering of tariff barriers, melting of international trade boundaries, the domestic market is now open and the Indian toy industry is facing the challenge from the domestic distributors and multinational competitors who import cheaper products mainly from China. Only 20% of the Indian market is served by Indian toy manufacturers while the rest is served by imported toys from different countries mainly from China and Italy. 1.2 Objectives of the study To study and document the overall structure of Indian Toy Industry. To measure the productivity and competitiveness of the toy industry in India vis a vis China with a view to identify the factors responsible for the success of the toy sector in China and to recommend adoption of relevant factors in India. National Productivity Council, New Delhi Page 2 Research Study on Productivity & Competitiveness of Toy Manufacturing Sector in India To develop a SWOT profile for the Indian Toy industry. Identify the major problems faced by Indian Toy Industry after the liberalization of the economy through an all India field survey of manufacturing units. To study and analyze toxic aspects of some of the common raw material such as Nickel, Lead salts, etc. used in the production of Toys. Identify the aspects and measures required for showcasing traditional toys in national and international markets. Traditional toys like terracotta, wooden toys, paper toys, cane and stick toys, traditional tin toys and collectables etc., having sizeable and up-gradation shall be covered in the study. Study of export potential for traditional Indian toys and other toys manufactured also shall be included. To undertake a wider interaction with various stake holders including Toy Industry Associations to find out major problems and suggest policy recommendations. To suggest areas where further interventions are urgently required to improve productivity and international competitiveness of the toy industry. 1.3 Methodology The research study has been undertaken in three broad phases: First phase of the study focused on secondary sources of data and literature. The data and literature have been compiled from both published and unpublished literature sources for the last six years with a view to understand the growth and development of toy manufacturing in the country during XII Plan. The published data on toy industry is mainly compiled from Director General Foreign Trade (DGFT) and Annual Survey of Industries, as per NIC 2008 classifications (three digit industries i.e. 324 - Manufacture of games and toys). Second phase of the study includes a detailed field survey with structured questionnaires across 137 Toy Manufacturing Units randomly selected from both traditional and modern segments spread across various toy manufacturing clusters (55 from traditional toy segment and 82 from modern toy segment) (Table 1.1 and Table 1.2). Field Survey has been undertaken through specially structured questionnaires for Modern Toy Segment (Annexure 1.1) and Traditional Toy segment (Annexure 1.2). National Productivity Council, New Delhi Page 3 Research Study on Productivity & Competitiveness of Toy Manufacturing Sector in India Table 1.1. Field Survey of Traditional Toy Manufacturing Units Name of Clusters/ No. of Units Sl. No. States Locations (Nos) 1. Andhra Adilabad and Kondapalli 08 Pradesh 2.

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