An Indian Toy Story That Isn’t Ending Well For Small Businesses
Multi-colored toy building blocks sit on display. (Photographer: Freya Ingrid Morales/Bloomberg)  

An Indian Toy Story That Isn’t Ending Well For Small Businesses

After India eased some of the lockdown curbs in April, Pawan Gupta started making colourful silicone bracelets for kids that can be filled with sanitiser. A distributor of toys, Gupta, 56, also planned to manufacture board games. But he shelved expansion, and now may even have to shut his new business.

Starting Jan. 1, Indian toymakers require certification from the Bureau of Indian Standards. Overseas suppliers selling to Indian firms, too, need the BIS tag. Gupta finds the new rule onerous and unviable.

“I am still manufacturing the activity band, hoping for an extension to comply with BIS norms,” said Gupta, who employs five people. “But if they come into force from Jan.1, then I will have to shut it.”

India’s toy market, pegged at Rs 12,000 crore by IMARC, is dominated by less than half a dozen large manufacturers like Funskool (India) Ltd. and Mattel Toys India Ltd. But of the 4,000 toymakers in the country, according to a National Productivity Council Report, about 75% are informal comprising small and cottage units. The BIS standards will increase the cost of compliance, threatening their survival. More so after the government increased import duty on toys threefold to 60% to boost local production.

The notification making BIS certification mandatory was issued in August, and the government gave companies till Jan. 1 to comply. The rule requires them to set up BIS-authorised testing labs in factories. The estimated cost of setting up one starts at Rs 3 lakh and could go up to Rs 8 lakh, according to Gupta. Add to that the monthly salary of at least Rs 30,000 to hire a lab technician, he said.

Small units will find it difficult to set up labs as a lot them make toys at home, according to Gupta, also a member of the Toy Association of India. The new standards, he said, could put them out of business, or they might end up selling toys without certification.

Vikram Goel, owner of a soft-toy unit in Mumbai, borrowed Rs 5 lakh from friends and family to set up a lab. That’s when his turnover has fallen to around Rs 1 lakh a month from an average of Rs 4 lakh (Rs 50 lakh a year) prior to the pandemic, he said.

“Now this is an additional cost,” Goel said. “I am awaiting for my equipment and then will apply for the license.”

The Toy Association of India has asked the government to exempt small manufacturers from lab testing or offer the option of cluster-based testing so that they can comply with the new norms, Ajay Agarwal, president of the lobby, told BloombergQuint.

Toys have a low shelf life with the portfolio changing every 15 days and Indian companies already struggle to keep up, according to Pulkit Singhal, owner of Toy Park retail store in Delhi. “The industry thrives on variety and frequent new launches,” he said. “Small manufacturers will not be able to fulfil the terms and conditions that the new BIS norms require, and it can disturb the industry struggling to keep up.”

A file photograph of a soft toys displayed for sale at a roadside stall. (Photographer: Dhiraj Singh/Bloomberg)
A file photograph of a soft toys displayed for sale at a roadside stall. (Photographer: Dhiraj Singh/Bloomberg)

Export Hopes

Large brands aren’t complaining. Funskool, India’s biggest toymaker, has certified its two units — in Goa and Ranipet, Tamil Nadu. The company is part of the MRF Group.

“As the new norms will come into play from Jan. 1, it will boost domestic manufacturing of toys,” R Jeswant, chief executive officer at Funskool India, told BloombergQuint over the phone. “We have lined up 100 new launches for 2021, higher than the 60-70 we launch every year.”

The company plans to expand its Ranipet unit expecting higher demand in India. Jeswant didn’t share timelines.

Manish Kukreja, chief executive officer at MIN (Made in India) Toy Pvt. Ltd., a maker of toy cars, has expanded capacity from 85,000 units a month to 100,000 at his factory in Silvasa, Dadra and Nagar Haveli. Kukreja, with a yearly sales of Rs 10 crore, is automating production to increase efficiency and output.

He plans to set up another unit and is waiting to see which state offers the best incentives. Kukreja is optimistic that BIS standardisation will make Indian toy manufacturers export-compliant.

Queries emailed to Mattel India remained unanswered.

Yearend Import Rush

India increased import duty on toys from 20% to 60% in this year’s budget. That reduced volumes. Total imports have fallen from Rs 2,101 crore in 2019 to Rs 775.4 crore this year.

While most toys are imported from China, BIS authorities will be unable to travel to India’s neighbour to the east to certify suppliers during the pandemic. Sensing disruption, many importers rushed to bring in shipments before the new norms kick in.

Funskool’s Jeswant, however, said this stock will dry up by the summer. His company, however, will also face disruption, at least temporarily, as it also sources some products from China and elsewhere.

“Factories from where we import are ready to be certified but due to travel restrictions we will have to wait,” said Jeswant. The current capacity, he said, will be able to take on additional demand as imports fall.

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