200% duty hike on toy imports; are traders exaggerating the real impact?

India's toy traders are concerned about the 200 per cent rise in customs duty on import of toys, but they might just be exaggerating the real impact of the duty hike on the price of toys.

While the import duty will technically go up from 20 per cent to 60 per cent, it will not apply to most of the imported toys as over 85 per cent of India's toy imports are from China, a country that is eligible for concessional duty as a signatory of the Asia-Pacific Trade Agreement (APTA). The APTA, a preferential trade agreement between five countries - India, China, Korea, Lao People's Democratic republic and Sri Lanka - provides concessional duty on over 1000 tariff lines including toys to encourage trade among member countries.

Due to 43 per cent discount in import duties allowed for APTA members, the actual duty on toys imported from China post increase will be 34.2 per cent, and not 60 per cent as alleged by the traders. Further, if the import is happening from one of the 10 member countries of ASEAN trade bloc, it will be zero per cent. Though not in huge volumes, toy imports also happen from ASEAN members Indonesia, Vietnam and Thailand to India. Thus the imports that will take the full hit of the duty hike will be the ones from developed nations of Europe or the United States.

Mumbai-based United Toys Association (UTA) had alleged that the import duty hike in toys will lead up to 100 per cent surge in the MRP of existing toys in India raising burden on customer's pocket.

The domestic toy market targets the 30 crore children in India who are in the age group of 0-14 years by stating that toys stimulate imagination, mental development and allow a child to understand, interact and connect with the world around them.

"It is estimated that within three-four months after the hike in import duty on toys, there will be a scarcity of toys in India. Indian manufacturers will not be able to fulfil the overwhelming demand of toys and in next three-four months the stock will be exhausted," Farooq M Shabdi, President of United Toys Association says. He adds that the most impacted range of toys will be innovative toys which includes STEM toys, robots, flying toys, radio control and battery operated toys, as major part of toys manufactured in India are non-function toys and board games.

The move will also hurt 500,000 people (toy traders, retailers and auxiliary) across India, the UTA members say. Local toy makers contest this by stating that the duty hike, while not creating a huge price barriers (due to concessional duties), will help India develop its manufacturing capacities in the medium term and compensate for the job losses (if any) by creating new jobs in the sector.

The immediate cause of supply constraints is known to be factory shutdowns in China due to coronavirus infection, and not the duty hike.

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