September 27th, 2012
11:12 AM GMT
This month, Indian Prime Minister Manmohan Singh announced that the country is opening its retail and aviation industries to foreign investment. The move comes at a critical time for the country as the emerging market sees its slowest growth in some three years.
One sector that could see a boost is the Indian toy industry – weighed down by irregular taxation, excise duties and a lack of investment – many toy makers in Mumbai are looking optimistically to the future.
At the moment, when Mumbai –based Natasha Sharma goes toy shopping for her children she says she often doesn’t find what she is looking for.
The children’s book author says the choices are limited. All the more if she wants a toy made in India.
“It's not that toys made in India haven’t increased. It’s just that there's more stuff coming in from abroad,” she told CNN’s Mallika Kapur
And by abroad that means mostly one country – China.
“Almost 70 percent of the toys in our store would be Chinese,” said Faisal Khatri, owner of Souvenir, one of the oldest and most popular toy stores in Mumbai.
According to Khatri, he stocks more toys from China because they are more reasonably priced and better.
“They are innovative and excite the child more,” he said.
A recent study says domestically manufactured toys account for only 15 percent of sales.
Indian toy makers face numerous obstacles according to Vivek Jhangiani of United Games, who makes board games and also represents the Toy Manufacturers Association of India.
“Our input costs are much higher. If I was to import toys in a finished form, I'd be paying around 16 percent. But if I was to import plastic, it's about 28 percent,” he said.
Costs are just one of the reasons. It’s also difficult to source good quality raw materials and of course there is competition from China, said Jhangiani.
To fight that, Indian toy makers need scale – that’s a big challenge.
For years, Indian toy manufacturers have been stuck in a rut, part of an unorganised sector burdened by the lack of distribution, innovation and infrastructure.
That is likely to change according to Pinkakiranjan Mishra, retail analyst with Ernst and Young, thanks to a recent government decision to open up India’s multi brand retail sector to foreign investment that will provide an opportunity for toy makers to achieve scale.
“Tomorrow if say a retailer like Walmart grows in India, if they grow in size, they are projecting a 20-25 percent growth in the future. Part of it will come from this category as well,” Mishra said.
Scale is the one thing holding sisters Manisha and Vaishali Gadekar back. They make traditional Indian toys but their company Kec Green Games has just a handful of niche buyers. They say it isn’t practical to retail out of big stores.
“It's all about margins in the end, everyone's looking at only margins. No one's looking at the aesthetic or encouraging the small scale industry,” they said.
Since their reach is limited, the Gadekars hold workshops at home so children can experience playing with Indian toys – an experience that’s hard to find elsewhere.
Along the Silk Road
“Along the Silk Road” explores the burgeoning trade and investment links from the Middle East to Asia – Beijing, Mumbai, Istanbul, Kabul, Moscow, Hong Kong, Jakarta and Dubai.
The series surveys the export-driven economies, countries with vast capitals of reserve and natural resources, that economic forecasters pinpoint as ringleaders of growth for the next quarter of a century.
Catch “Along the Silk Road” every Wednesday on CNN International within Global Exchange:
Follow the show on Twitter @CNNGlobalEx and use the hashtag #CNNGlobalEx to join the conversation.