Unboxing the ‘export turnaround’ in India’s toy story

Context:

India has recently turned a net exporter of toys, during 2020-21 and 2021-22, ending decades of import dominance.

Concerns:

India’s export surplus in toys during 2020-21 and 2021-22, is a welcome change. However, it seems to be driven by a rise in protectionism, and the exceptional circumstances of the COVID-19 pandemic.
The turnaround does not seem to be the outcome of strengthening domestic investment and production on a sustained basis.

India’s steps towards toy industries:

Historically, Asia’s successful industrializing nations promoted toy exports for job creation, starting with Japan about a century ago.
China since the 1980s, and currently Vietnam following in their footsteps.

Planning-era:

India followed an inward-oriented industrial policy, with the “reservation policy”, in which toy manufacturing remained stagnant, archaic and fragmented, even as imports of modern, safe, and branded toys boomed.

During LPG reforms:

In 1997, in the wake of liberal reforms, the reservation policy was abolished.
Expectedly, new firms entered the organized sector, but only for a while, and productivity growth improved.
But the unorganized sector languished with job losses, even as a majority of workers remained there.

During ‘Make in India’ initiative:

Despite early positive trends, industry de-reservation failed to sustain output, investment, and productivity growth.
Contrary to popular perception ‘Make in India’ had a negligible effect in strengthening toy production and exports on a sustained basis.

Too premature to claim success:

The potential for sustaining net exports appears slim as the industry has hardly made sustained investment to boost output and exports.

Conclusion:

The study highlights that the industry’s performance is not significantly influenced by the reservation policy during the Planning era or its abolition after liberal reforms.
It suggests the importance of considering industrial locations and clusters and tailoring policies and institutions accordingly, rather than relying on simplistic planning versus reforms perspectives

News Source: The Hindu