In a strategic move to bolster domestic toy manufacturing, the Indian government is transitioning from the traditional Production Linked Incentive (PLI) scheme to a more tailored capital expenditure (capex)-linked incentive model. This shift aims to address the unique challenges of the toy sector and enhance its global competitiveness.

Understanding the Transition

The PLI scheme, designed to boost manufacturing by offering financial incentives tied to measurable outcomes like higher production and incremental sales, has seen varied success across sectors. While it has been effective in areas like large-scale electronics manufacturing, sectors such as steel and textiles have lagged. Notably, less than 10% of the funds allocated in the PLI scheme have been utilized since its inception. Moneycontrol

Recognizing these limitations, the government is now exploring a capex-linked incentive model, similar to the recently introduced Electronics Component Manufacturing Scheme (ECMS). The ECMS provides differentiated incentives linked to either turnover or capex, or both, and has received significant interest, attracting 70 applications within 15 days of its launch. Moneycontrol+2Moneycontrol+2Moneycontrol+2

Implications for the Toy Industry

The proposed capex-linked scheme is expected to offer several benefits to the toy industry:

• Customized Support: By focusing on capital investment, the scheme aims to provide more targeted assistance to toy manufacturers, addressing their specific needs and challenges.

• Enhanced Competitiveness: With a focus on building infrastructure and capacity, the scheme is poised to make Indian toy manufacturers more competitive in the global market.

• Export Growth: The initiative is timely, as Indian toy exports have declined to $152 million in 2023-24 from $177 million in 2021-22. By strengthening domestic manufacturing, the scheme aims to reverse this trend.

Strategic Considerations

For stakeholders in the toy industry, this policy shift presents both opportunities and considerations:

• Investment Planning: Manufacturers may need to reassess their investment strategies to align with the new capex-linked incentives.

• Compliance and Eligibility: Understanding the criteria and compliance requirements of the new scheme will be crucial for businesses to maximize benefits.

• Long-Term Growth: The focus on capital investment suggests a long-term vision for the industry's growth, encouraging sustainable development over immediate output gains.

Conclusion

The Indian government's move to a capex-linked incentive model for the toy industry reflects a nuanced approach to sector-specific challenges. By prioritizing capital investment, the initiative aims to build a robust domestic manufacturing base, enhance global competitiveness, and stimulate export growth. Stakeholders should stay informed and proactive to leverage the opportunities presented by this policy evolution