According to a Bloomberg report, three years ago, Vijendra Babu, Managing Director of Micro Plastics Pvt, invested $30 million to build India's largest toy factory and established a comprehensive industrial chain covering "design, mold-making, and production." Over the past two years, Babu's business nearly doubled, but now he is questioning the wisdom of his earlier massive expansion.
The turning point occurred on August 6 this year, when the United States imposed a 50% tariff on India due to its continued purchase of Russian oil. Before this, Babu's business was thriving, with orders from global toy giants such as Hasbro, Mattel, and Spin Master, and over a dozen trucks loaded with Christmas toys dispatched daily. Now, due to tariff barriers, his warehouse is eerily quiet, with towering shelves filled with semi-finished products and packaged goods that cannot be shipped on time.
The report notes that after the tariff policy was announced, many customers immediately paused or outright canceled their orders. Babu told Bloomberg that the factory currently has backlogged goods worth $20 million awaiting shipment, with an additional $15 million in new orders on hold. He had optimistically predicted a 40% business growth this year, but not only has that expectation fallen through, but sales are also facing a severe challenge of a potential 15% decline.
▌ **May Lead to Permanent Supply Chain Relocation**
Babu's predicament is not an isolated case but rather a reflection of the broader setbacks to India's "national dream" in the toy industry. Over the past few years, India had leveraged a series of domestic protection and support policies in an attempt to reshape the global toy supply chain and once achieved notable progress.
According to a report by the India Brand Equity Foundation, India's toy industry was long dominated by imports, with China accounting for about 70% of the supply. However, as the Indian government launched the "Make in India" initiative and increased toy import duties, this market structure changed rapidly.
In 2020, the Modi government introduced the "National Toy Action Plan" to support the domestic toy industry, raising import tariffs on toys from 20% to 70% while introducing safety certifications and quality standards to enhance export prospects.
With the support of multiple government policies, India's toy imports plummeted, domestic manufacturers filled the gap, and overseas sales began to climb. Data show that since the announcement of the action plan, India's toy and sports goods exports have grown by 42%, reaching $570 million.
However, sudden changes in the external macro-environment have cast a shadow over the expansion of India's toy industry. According to *The Economic Times*, as the U.S. imposes a 50% tariff on Indian toys, buyers are turning to other markets, leading to a continuous decline in orders for Indian toy exporters.
Amitabh Kabandha, a board member of the India Toy Association, told *The Economic Times*, "Orders for the U.S. holiday season, typically received from October to November, have decreased by 50% this year." As the U.S. is a core pillar market for Indian toy exports, this sharp decline in demand is triggering a chain reaction. Industry analysis points out that Indian suppliers are not only facing immediate performance setbacks but also deeper risks, as long-term business relationships and supply chain coordination may unravel.
To maintain competitiveness, exporters are adjusting by lowering prices and simplifying designs. Kabandha noted that toy manufacturers have started moving toward streamlined packaging, functions, and reduced product sizes to absorb the cost increases brought by tariffs. A Delhi-based toy exporter added, "As customers demand additional discounts, we have had to make adjustments to product designs. If we cannot meet this demand, business may shift to countries like Vietnam."
▌ **India's Path to Toy Industry Growth Faces Challenges**
However, Indian media analysis suggests that these temporary measures have their limitations. The key to the toy industry's recovery lies in whether it can successfully shift goods transportation to other markets and adjust product designs, cost structures, and supply chains to remain competitive under high tariffs.
According to Bloomberg, after years of development, India has transformed from a toy importer to a net exporter. However, in the global core markets-particularly the U.S., the world's largest toy market-its market share remains significantly smaller compared to China and Vietnam. Bloomberg cited data showing that last year, India's toy exports to the U.S. were only $100 million, far below China's $11 billion and Vietnam's $3 billion.
The report argues that although India has abundant and low-cost labor resources, its domestic industry still faces constraints such as a lack of core technology and fragmented supply chains in the manufacturing transformation process. A notable contradiction is that while India has reduced imports of finished toys from China, key components such as specialized synthetic plush fabrics, electronic parts, and even the eyes for dolls and teddy bears are mostly imported, often from China.
*The Economic Times* cited a related industry report pointing out that the price of domestically produced polymers in India (various plastic raw materials needed for toy production) remains about 10% higher than in China, directly undermining the competitiveness of local manufacturing.
Additionally, the India Brand Equity Foundation noted that although India's toy industry shows significant growth potential, its underlying structural challenges remain severe. First, the industry is highly fragmented, dominated by small, medium-sized, and cottage enterprises, affecting standardization, quality control, and brand recognition. Furthermore, traditional manufacturers in India have limited infrastructure and technological capabilities. Most local toy manufacturers still rely on outdated production methods, leading not only to low efficiency but also severely constraining their ability to achieve economies of scale. Indian media analysis pointed out that toy exports from countries like Bangladesh and Argentina are steadily expanding at double-digit annual growth rates. In the face of such strong competitive momentum, India must accelerate the upgrading of its manufacturing industry.
