Wage increase in China could benefit Indian toy industry: DIPP report

According to a report by the Department of Industrial Policy and Promotion, only 20% of the Indian market is served by Indian toy manufacturers while the rest is served by imported toys from different countries, mainly China and Italy.

Over the past three to four years, the Chinese market has experienced labor strikes in some of its major factories, resulting in a shrinking workforce. The demand for wages has been another call from the Chinese workforce. Economists say China is trying to rebalance its economy. One of its goals is to reduce dependence on exports and increase the share of consumption. John Baby, Managing Director (CEO) of Funskool, said a shrinking workforce and higher wages in China would likely benefit India’s toy manufacturing industry. “I think there is an opportunity for India because China is not encouraging more workers,” he adds.

Sujan Hajra, Chief Economist, Co-Head of Research at Anand Rathi Securities, said: “China does not want polluting industries and related exports. If labor costs increase, it is obvious that in an intensive industry like toys, it will not be able to compete and China is trying to free up this space. It is only right that an increase in labor costs in China could help the Indian toy industry.

The CEO of Funskool explains that Funskool has a strong presence in South India, with over 40% of its business in South India and the remaining 60% in the rest of India. “I think the South Indian market is a better market for all branded toys, with infants and preschools being the biggest segment,” adds John.

Regarding exports, he acknowledges that the toy industry is competitive. “Currently, our domestic activity is 70% and exports 30%, and within two years we expect to reach a ratio of 50:50. Compared to exports, our domestic business is currently more profitable,” he explains. According to a report by the Department of Industrial Policy and Promotion (DIPP), only 20% of the Indian market is served by Indian toy manufacturers while the rest is served by toys imported from different countries, mainly China and India. ‘Italy. Ironically, until September 2017, India’s toy industry, which largely consisted of small and medium-sized enterprises (SMEs), was caught in a strange paradox – it recorded double-digit growth in the past five years, yet around 40% of Indian toy manufacturing units had closed.

Hajra further added that lower grade toys from China are no longer imported, but for high end toys there is still some competition. Funskool CEO believes that there is potential for growth in the organized toy manufacturing sector due to cheap labor, benefits of Chinese market restructuring, government initiative, etc. . Promoted by the MRF Group, Funskool represents Hasbro, Takara Tomy, Ravensburger, SIKU, Playmobil, Meccano and a few others through distribution deals for India.

Despite Chinese demand for higher wage hikes and several strikes in the past, manufacturing capacity seems unlikely to stop in the future. A recent PwC report suggested that artificial intelligence could actually create nearly 100 million new jobs in China over the next two decades.

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