What might shape the future of India's toy business?

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What might shape the future of India's toy business?

Why in News?

"Recently, a report from the Global Trade Research Initiative suggested a plan to help India's toy industry grow and sell more toys abroad. The goal is to make India a top place for making and selling toys worldwide. They want to do this by improving the quality of toys, encouraging new ideas, and finding more places to sell them."

What is the Status and Potential of India’s Toy Industry?

• India's toy industry holds a marginal position in the global market, with only a 0.3% share in exports and 0.1% share in imports.
• Ranked 27th in global toy exports and 61st in toy imports, India's current standing underscores its potential for growth.
• Despite its small market share, India boasts diverse manufacturing capabilities, particularly in electronic toys, plastic dolls, and metal toys.
• The industry is projected to reach USD 3 billion by 2028, with a compound annual growth rate (CAGR) of 12% between 2022-2028.
• India is expanding its global presence, focusing on high-value exports to regions like the Middle East and Africa.

What are the Challenges Faced by India’s Toys Industry?

Lack of Technology: Outdated technology and machinery prevalent among domestic manufacturers hinder quality and design innovation in Indian toys.

High GST rates: Differential tax rates, with mechanical toys taxed at 12% and electronic toys at 18%, create complexities in classification and taxation, affecting cost structures.

Lack of Infrastructure: Challenges stemming from inadequate infrastructure, including the absence of end-to-end manufacturing facilities, testing labs, toy parks, clusters, and logistics support, impede industry growth.

Unorganized and Fragmented: The Indian toy market remains largely unorganized, with 90% of it fragmented, posing difficulties in maximizing industry benefits and coordination.

Other Challenges: Various factors such as cost-effectiveness, product diversity, adherence to quality standards, and implications of trade agreements significantly influence the global toy trade landscape.

Market Dynamics: Shifts in consumer preferences, technological advancements, and regulatory changes continually reshape the dynamics of the toy industry, necessitating adaptability and innovation from market participants.

Way Forward

Government Initiatives: Support the toy industry through schemes like SFURTI by the Ministry of MSME, aiming to regenerate traditional industries and promote exports, thus enhancing India's global presence in the toy market.

Encourage Global Toy Brands: Invite international toy manufacturers, such as Hasbro, Mattel, Lego, Spin Master, and MGA Entertainment, to establish production facilities in India, leveraging the country's growing market potential.

Collaboration for Technology Transfer: Foster partnerships with international counterparts for technology transfer and skill development, bolstering India's competitiveness in the global toy trade.

Learn from China's Success: Analyse China's trajectory in the toy industry, understanding how it transformed from a modest market to a dominant global exporter. Emulate strategies for penetrating demanding markets like the USA, EU, Japan, and others, despite initial challenges with product quality and safety.

Localize Production of Key Inputs: Promote local manufacturing of crucial toy-making materials such as glass eyes, beads, imitation stones, plastics, electric motors, and remote-control devices. This initiative aims to enhance self-sufficiency, reduce costs, and minimize dependency on imports, thereby strengthening the industry's resilience.

What Influences the Price of Gold on a Global Scale?

Why in News?

A recent study in economics discovered that crude oil prices and gold prices go up or down together, while the value of the U.S. dollar and gold prices move in opposite directions.

What are the Major Findings of the Study?

- Major Findings:

• Crude oil prices and gold prices are directly related.
• The value of the U.S. dollar and gold prices have an inverse relationship.

- Implications:

• When crude oil prices go up, gold prices go up.
• When the U.S. dollar strengthens, gold prices decrease.

- Reasons:

• Higher global crude oil prices lead to inflation.
• Gold is sought after as a hedge against inflation because it retains its value.
• A strong U.S. dollar keeps gold prices stable.

• A weaker U.S. dollar increases demand for gold as people seek a safer investment.

What are the Factors that Affect Gold Prices Worldwide?

- Gold Production:

• Gold prices depend on production and mining costs.
• New production is expensive as it requires digging deeper into the earth.
• Rising crude oil and natural gas prices lead to higher gold prices.
• Top 5 gold producing countries: China, Australia, Russia, Canada, and the US.

- Demand by Central Banks:

• Central banks buy gold to strengthen reserve assets.
• Rising crude oil prices and geopolitical tensions prompt central banks to increase gold reserves.
• Reserve Bank of India held 822 metric tonnes of gold as of March 2024, with 408 metric tonnes held domestically.

- Investor Demand:

• Investors turn to gold during market downturns.
• Gold is seen as a haven due to its liquidity and lack of default risk.
• Individual and institutional investors diversify their portfolios with physical gold, financial derivatives, and ETFs.

- Consumer Demand:

• Consumers and jewellers drive demand, especially in China and India.
• Gold is bought as a traditional store of wealth and for special occasions.
• Consumer demand is mostly seasonal.

- Industrial Demand:

• Gold is valued in industries for its properties like malleability and conductivity.
• Used in electronics, dentistry, aerospace, and medical devices.
• Common applications include electronics components, dental prosthetics, spacecraft coating, and medical implants.

What is the Status of the Gold Industry in India?

- Gold Reserves in India:

• Total reserves/resources of gold ore in India estimated at 501.83 million tonnes as of 2015.
• Largest gold ore resources located in Bihar (44%), followed by Rajasthan (25%), Karnataka (21%), West Bengal (3%), Andhra Pradesh (3%), Jharkhand (2%).
• Karnataka contributes around 80% of India's total gold output, with the Kolar Gold Fields (KGF) being one of the oldest and deepest gold mines in the world.

- India Gold Import:

• India ranks as the world's second-largest gold consumer.
• Gold imports rose by 30% in 2023-24, reaching USD 45.54 billion.
• However, there was a significant 53.56% decline in gold imports observed in March 2024.

- Sovereign Gold Bond Scheme:

• Introduced by the Government in November 2015 as part of the Gold Monetisation Scheme.
• Aims to reduce demand for physical gold and encourage investment of domestic savings in financial instruments instead.

Employment Trends in India

Why in News?

"In the past few years, India has seen a big increase in jobs. Over 80 million new jobs were created between 2017-18 and 2022-23. This fast growth has started discussions about why it happened and if it will keep going."

What are the Key Trends in Employment Growth?

- Historical Growth:

• Analysis of NSSO data from 1983 to 2023 shows consistent growth in principal employment.
• Principal employment refers to main jobs worked for the bulk of the year.

- Consistent Growth:

• Principal employment has consistently grown since 1983.
• Subsidiary employment is part-time, shorter duration, and additional to the main job.

- Significant Increase (2017-2023):

  Fastest increase in employment occurred from 2017-18 to 2022-23.

  Around 80 million additional jobs were created, with an annual growth rate of 3.3%.

- Labour Market Indicators:

• Key indicators like labour force participation rate and unemployment rate have improved in recent years.
• These improvements happened during economic distress, including the Covid-19 pandemic.

- Broad-Based Growth:

• Employment growth distributed across rural and urban sectors, and various industries.
• Highest employment growth seen among women and older people.

- Women and Older People:

• Employment growth highest for women, over 8% annually.
• Employment among those aged 60 and above grew at around 4.5% annually.

- Employment Condition Index:

• Based on seven labour market outcome indicators.
• Index improved between 2004-05 and 2021-22, but some states consistently ranked lower or higher.

How has Employment Quality Evolved?

- Rise in Informal Employment:

• About 50% of jobs in the formal sector are informal.
• Around 82% of the workforce is engaged in informal work.
• Nearly 90% of workers are informally employed.

- Dominance of Self-Employment:

• A large part of employment growth, about 44 million jobs, is in own-account work and unpaid family work.
• Government schemes like Pradhan Mantri MUDRA Yojana (PMMY) have provided significant funding to this segment.
• Self-employment is the main source of jobs, making up 55.8% of employment in 2022.
• Casual employment (hiring as needed) accounts for 22.7%, and regular employment for 21.5%.

What is the Trend in Wages and Salaries?

• Wages and salaries haven't been growing much lately.
• They grew by 6.6% each year before inflation from 2017-18 to 2022-23, but only 1.2% after.
• Living conditions haven't gotten much better despite wages not dropping. This could be because lots of new workers came in, and productivity at work might not be improving much.

What are the Trends in Youth Employment?

• Youth had more jobs or part-time work from 2000 to 2019 but less during the pandemic.
• But, young people, especially those who finished high school or went to college, had a harder time finding jobs.
• In 2022, about 83% of all people without jobs were young, and 66% of them had some education, up from 54% in 2000.
• Young people with higher education had much higher unemployment rates than those who didn't finish school, especially women.
• In 2022, about 18% of young people who finished high school couldn't find jobs, while 29% of graduates couldn't. For those who couldn't read or write, it was only about 3%. Among women, it was even higher, especially for those who graduated.

What are the Concerns Regarding Employment in India?

- Growth of Informal Sector:

• Despite economic growth, many new jobs lack security, benefits, or minimum wage.
• These informal jobs are on the rise.

- Quality of Jobs for Youth:

• Youth employment might not show high unemployment rates, but many jobs are of lower quality.
• Young people might be overqualified for available jobs or stuck in insecure situations like gig work.

- Gender Gap:

• Women's participation in the workforce hasn't increased as expected.
• Many ends up in unpaid family work or low-paying self-employment instead of formal jobs.

- Skill Mismatch:

• Education might not match current job market needs.

- Formalisation Challenges:

• Much of India's workforce remains informal, leading to lower tax revenue and limited social security benefits.

- Job Automation:

• Automation threatens certain sectors, potentially displacing jobs, particularly in manufacturing and outsourcing industries.

- Vulnerability to Economic Shocks:

• Informal workers are highly vulnerable to economic downturns, as seen during the Covid-19 pandemic.

- High Demand for Government Jobs:

• Due to limited job creation in the private sector, there's high demand for stable government employment.

Way Forward

• Encourage informal workers to join the formal job sector by making it appealing. Learn from Peru's plan and involve different groups like the government, businesses, schools, workers, and community organizations. Make it easier for small informal businesses to register officially, so they follow work laws and get benefits like social security.
• Help marginalized groups by giving them special training programs, like the SMILE initiative, so they can get better jobs too. Teach people about AI, robots, and data so they can adapt to new kinds of work.
• Make a social security system that moves with gig workers and people who switch between informal and formal jobs. Help new businesses start by creating special places for them to grow and giving them money early on.
• Encourage more remote work so people who live far away from cities can have jobs too. This also helps people balance work and life better.