India’s manufacturing sector continues to lag behind many of its Asian peers in terms of competitiveness. 

• While this structural inefficiency has often been obscured by high trade barriers, recent trends suggest a growing reliance on non-tariff measures (NTMs), particularly Quality Control Orders (QCOs), as a policy tool.

Recent Policy Framework

• Quality Control Orders (QCOs): Issued in 2020, these orders aimed to regulate the quality of imported toys, effectively acting as non-tariff barriers.
• Increased Tariffs: In 2019, tariffs on toy imports stood at 20%. By 2024, this had dramatically increased to 70%.

Initial Impact Of the Policy

• These policies achieved their immediate goal: toy imports significantly declined. 
• In the financial year 2020, India imported toys worth $279 million, which plummeted to just $35 million by 2023 — a roughly 90% decline.

Consequences Of Quality Control Orders (QCOs) and Increased Tariff

• Shift to Component Imports: Restrictions on finished toy imports led to an unexpected rise in the import of toy parts. 
  • Manufacturers are now importing components (e.g., for electronic toys) and assembling them locally, undermining the goal of true self-reliance.
• Import Diversion, Not Elimination: The policies did not eliminate import dependency but merely shifted its origin. 
  • Imports from China declined, but imports from countries like Vietnam surged by up to 1300%, highlighting the inadequacy of India’s domestic manufacturing base.
• Decline in Domestic Sales and Job Losses: India’s top 10 toy manufacturers reported a 55% decline in product sales between 2022 and 2024. 
  • The hardest hit was the electronic toy segment and the MSME sector, a significant employment generator.
• Demand-Supply Imbalance and Rising Prices: With imports slashed and domestic production unable to keep up, supply has lagged behind demand. 
  • Children aged 0–14 make up 25% of India’s population, ensuring high toy demand.
  • As the prices have soared. The Consumer Price Index for toys rose by 10 points in 2022 and another 11 points in 2023.
• Burdensome Compliance Costs: MSMEs face high costs to comply with QCO norms. 
  • The Bureau of Indian Standards (BIS) certification, which must be renewed every 1–2 years, costs between ₹50,000 to ₹1 lakh. 
  • This discourages smaller players, further weakening the ecosystem.
• Masking Domestic Inefficiencies: Rather than improving domestic quality, QCOs have served as protectionist tools, shielding local manufacturers from global competition and masking structural inefficiencies.

Way Forward

• Domestic Capacity Building: The emphasis should shift from import restrictions to improving local production capacity and efficiency.
• Investment in R&D: India must invest in high-tech manufacturing and innovation in the toy sector.
• Scale and Quality: Manufacturers should be incentivised to scale up while meeting international quality benchmarks.
• Integrate with Global Value Chains: Rather than isolation, India should integrate into global supply chains to foster competition and capacity building.
• Address Structural Weaknesses: India must resolve underlying challenges such as logistics delays and inefficient distribution systems.

Adopt a Competitive Approach: Policies should aim to create “Make in India” products that are globally competitive in price and quality—not reliant on import restrictions.n

Conclusion

For long-term sustainability, India must transition from reactive protectionism to a strategy grounded in capability-building, innovation, and global competitiveness.

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