Higher duty on toys won’t cut reliance on Chinese imports
KOLKATA: Increasing import duty on toys and artificial jewellery will do little to cut the country's dependence on Chinese imports in these sectors, according to domestic players, who say the government should instead raise the local industry's ability to compete better.
The Budget has proposed to increase Customs duty on toys and artificial jewellery to 20%. Domestic manufacturers say that dependence on Chinese-made toys and costume jewellery cannot be brought down immediately because of their lower prices and Indian units' inability to match their products due to poor infrastructure. "The increase in import duty will not help the Indian manufacturers immediately.
At the retail level, Chinese toys enjoy 80% shelf space," Manish Kukreja, president of All-India Toy Manufacturers Association, told ET. "This matrix cannot change within a very short span of time. What the government can do is keep stricter watch on entry of Chinese toys through illegal routes." The Indian toy industry is worth about Rs 9,500 crore.
"The government has to take a holistic approach and ensure price stability in raw material for helping the domestic toy industry," said Kukreja. "Cost of power in India has gone up by 55% in the last five to seven years, whereas it has gone down by 19% in China. Labour cost is also high in India. If we have to compete with Chinese toys, we need to bring down our cost."
Ishmeet Singh, country manager-India, Mattel Inc, said, "As per Budget 2018, there has been a substantial increase in Customs duty to 20% for toys and sports goods. This, combined with the other policy changes that have been implemented over the last six months—which include higher rates of taxes under goods & services tax (GST) and strict import regulations-—will result in an overall increase in the price of toys by 20%."
Electric toys attract 18% GST against the earlier 12% value-added tax (VAT) while other toys attract 12% GST versus 5% VAT earlier.
While Chinese toys have nudged out locally manufactured ones in retail stores, cheap artificial jewellery from China has also flooded the costume jewellery market, estimated to be worth about Rs 13,000 crore. The trend is supported by the rising price of gold which pushes buyers towards these items.
Import duty on artificial jewellery has been increased from 15% to 20%. "We cannot bring down our dependence on costume jewellery from China. They have now become part of our system," said Rajesh Chheda, a leading costume jeweller from south Mumbai. "There are customers who want those jewellery and we cannot lose them. Prices will definitely go up by 15% -20% from April. The increase in import duty comes at a time when the market sentiment is not very upbeat and movement of goods is slow.