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Education in India: Time to Connect the Dots and Look at the Big Picture

In the last few days, I read news reports that are seemingly unrelated on the surface. However, I think there exists a deeper connection for those willing to think outside the box. I thought I would use this article to articulate my thoughts on the connections and their possible implications for India. 

India’s New Education Policy expected to gain traction

The first item was about various initiatives announced by the Union government on the first anniversary of India’s National Education Policy (NEP). While internationalization, multiple entry/exit options, and digital education will be key pillars, one other important component is to enable students to pursue first-year Engineering courses in Indian languages.

In the context of the broad-brush changes envisioned to India’s education system, it is time to rethink the role of the UGC as a body that enables the nation’s higher education system in ways beyond disbursing funds to be recognized universities. There also ought to be more harmony between the various Boards that govern school education. The roles of bodies responsible for governing professional education in India- e.g., AICTE, NMC (which replaced the MCI), ICAI, ICSI, ICWAI, Bar Council of India etc. should also be redefined to ensure that India’s professionals remain in tune with the needs of a fast-changing world.

English will play an important role in our continued growth

The second report that caught my attention was on two main points made by Mr. Narayana Murthy (the Founder of Infosys), in a recent media interaction. He stated that it is high time that English be formally acknowledged and designated as India’s official link language, and greater emphasis is given to its teaching and learning in Indian schools. He said that his opinion is based on his first-hand knowledge of many technically qualified students in Bangalore/Karnataka who lose out in the job market largely because they lack a certain expected level of proficiency in English.

In the same interview, Mr. Murthy went on to say that on a priority basis, India needs overseas universities and vocational educational institutions to set up facilities in India to train students and teachers in key areas like nursing. This too makes sense because our healthcare infrastructure needs massive upgrades- and human resources will be critical.

China’s tightening regulations threaten its US$100 Billion EdTechc industry

The third report was on China’s recent decision to tightly regulate its online tutoring companies. The new rules bar online tutoring ventures from going public or raising foreign capital. There are also restrictions on the number of hours for which tutors can teach during weekends and vacations. In fact, the rules go so far as to make online tutorial businesses “not for profit”.

Different views have been expressed on why Chinese authorities have taken this step. Some see it as a means to reduce the cost of children’s education- and thus encourage couples to have more children. They point to this as a logical enabler of the recent relaxations in China’s two-child policy. Others view it as a step designed to clip the wings of Chinese tech companies that are deeply entrenched in many consumer segments, and have, over the past decade, acquired significant financial muscle.

To put into perspective the size of Chinese EdTech companies, consider this data point: Byju’s, arguably India’s largest EdTech company, was valued at over US$16.5 Billion as of mid-June 2021. Despite this high valuation, Byju’s would have been smaller than the top 5 Chinese EdTech players (on the basis of valuations that existed before the recent draconian rules came into effect).

Implications for India

The majority of China’s EdTech ventures are financed through significant venture capital investments from the west. Analysts expect that China’s sudden actions will, at least in the short run, divert capital to other locations. India could be a potential beneficiary because it already fosters a large EdTech ecosystem.

Given our demographics, we have a significant domestic market for education across all levels- primary, secondary, and college. Since digital education will likely become the norm, this space is ripe for newfangled innovations in the days ahead. If online education can bridge the gaps that employers currently perceive in our fresh graduates, unemployability rates shall notably decline. . This will not only contribute directly to our GDP but also indirectly stimulate innovation and entrepreneurship.

India has a large technical skill base. Some of these resources can easily be harnessed to develop next-gen education solutions using cutting-edge technologies such as AI, ML, Language Processing, Augmented Reality, etc. To begin with, Indian start-ups can build, test, and scale EdTech platforms and solutions for our domestic market. Over time, these can be refined and repurposed for global markets. Similarly, features built for the global market can be adapted to Indian markets, thus creating a virtual cycle. Such a trend will not only proffer legs to implementing India’s NEP but will also enable us as a society to improve access to education to underprivileged sections of the society. This is critical to sustaining our growth on the path of socio-economic development.

By taking the right decisions now, we can attract capital, talent, and world-famous institutional brands to this critical sector. EdTech in India has the potential to become a powerful engine of growth for our services sector. Done right, I have no doubt that in a few years, India can become a “Vishwaguru” not just in the spiritual sense, but also literally.

PS: As with many other sectors in India, the legal framework that governs education too needs to be made more contemporary and relevant, but that’s for another time.

Image Credits: Photo by Nikhita S on Unsplash

By taking the right decisions now, we can attract capital, talent and world-famous institutional brands to this critical sector. EdTech in India has the potential to become a powerful engine of growth for our services sector. Done right, I have no doubt that in a few years, India can become a “Vishwaguru” not just in the spiritual sense, but also literally.

 

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India Needs New Regulations - But Simplification of Compliance is Just as Critical

In earlier posts, I have touched upon the need for Indian laws to be updated to better reflect the current environment and foreseeable changes to it brought about by various forces, primarily technology-led innovation. This is not just because of the need to plug legal loopholes that are exploited to the nation’s detriment but also with the objectives of streamlining compliance and better enforcement.

 

Recently, the union government did exactly this when it announced a new set of rules to govern the operations of drones in India. A new draft of the Drone Rules, 2021, now out for public consultation, will, when approved and notified, replace the UAS Rules, 2021, which were announced in March 2021. The fact that the government has come out with a new set of rules within 4 months of issuing the earlier version is a welcome sign of change, as it signals recognition of a rapidly-changing environment as well as the importance of timely and appropriate responses.

Changes are aimed at simplification and less regulatory control

The new rules are remarkable for other reasons as well. At about 15 pages in length, the new rules are only a tenth of the earlier rules. The changes are not limited to the form; there are substantive changes too. The new rules seek to do away with a large number of approvals (e.g., Unique Authorization Number, Unique Prototype Identification Number etc.).  Licensing for micro drones for non-commercial use has been done away with. Recognizing the immense potential for drones to revolutionize our society and economy, the government proposes to develop “drone corridors” for cargo delivery. Prior authorization of drone-related R&D organizations is being removed. A drone promotion council is to be set up, in order to create a business-friendly regulatory regime that spurs innovation and use of drones. All this augurs well for the development of a robust drone ecosystem in India.

Implementing the “spirit” of underlying regulations is vital

The change to the drone rules is a welcome step- just as the consolidation of 29 of the country’s labour laws into four Codes during 2019 and 2020 was. But rationalization becomes futile if there is no element of reform- e.g., doing away with requirements that have outlived their utility or need significant changes to remain relevant in the current environment? There were many expectations around the Labour Codes, but in the months that followed, it is fair to say that there was also much disillusionment amongst industry stakeholders because sticky issues, such as the distinction between “employees” and “workers”, payment of overtime, role of facilitator-cum-inspector etc., remained.

Simplifying compliance is necessary to improve “ease of doing business” further

The World Bank’s 2020 “ease of doing business” report ranks India 63rd; we were ranked 130 in 2016. The 2020 report considered three areas: business regulatory reforms (starting a business, paying taxes, resolving insolvency etc.); contracting with the government, and employing workers. 

But there are miles to go before we sleep. To ensure that India’s entrepreneurial energies and creative intelligence are directed to areas that will be critical in the years to come- e.g., space, AI, robotics, electric vehicles, clean energy etc. all need new regulations or revamp of existing legislations and rules. But this alone will not suffice. Implementing the spirit, and not just the letter of the law and rules and the simplification of regulatory compliance are important angles that government must pay attention to. These are going to be key determinants in improving our “ease of doing business”.

 

Technology is a necessary enabler but it is not sufficient

All regulatory filings- whether for approvals or compliance- should ideally be enabled in digital format. Digital dashboards in the government and other regulatory bodies should facilitate real-time monitoring. Only exceptions or violations should need further actions. To be sure, the government has initiated some steps in this direction- e,g., “faceless” interactions between business and the Income Tax authorities with the intention to reduce human interventions and thus, the possibility of corruption. But if the underlying income tax portal itself is not working properly, as was widely reported soon after it was launched, the desired outcomes will not be achieved.

Moreover, it is not just about having the right technology platforms in place. It is equally critical to bring about a mindset change in the administrative machinery that helps political leadership formulate policy and thereafter, enable implementation and performance monitoring.

Given India’s large domestic market and attractiveness as a base for exports, we as a nation stand on the threshold of a phase of significant economic growth. Many Indian entrepreneurs are establishing businesses overseas; this means that the benefits of jobs, tax revenues and IPR creation all move to other jurisdictions. The longer anachronistic and irrelevant laws remain on our books, and the harder regulatory compliance remains, the more we stand to lose. In a world where global investment flows, trade and supply chains are facing significant change under the influence of numerous forces, it would truly be unfortunate if India loses out largely because of continued difficulties in regulatory compliance.

Image Credits: Photo by Medienstürmer on Unsplash

The longer anachronistic and irrelevant laws remain on our books, and the harder regulatory compliance remains, the more we stand to lose. In a world where global investment flows, trade and supply chains are facing significant change under the influence of numerous forces, it would truly be unfortunate if India loses out largely because of continued difficulties in regulatory compliance.

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Toy Manufacturing - BIS Compliances, Schemes, and Incentives

One of the key flourishing industries in the world, India’s toy market is currently valued at $500 million out of a booming $90 billion global market. Statistics reveal that 80% of Indian toys are Chinese imports, while non-branded Chinese toys account for 90% of India’s market. Even though exports by the toy manufacturing industry from India amounted to $130 million during 2019-2020 with the USA and UK [1]being the lead exporters, the disparity and unutilized potential do not escape one’s attention.

As the second-most populated country in the world with almost 26% of its population below 15 years old, India has one of the largest consumer bases in the world. In fact, when the global average for demand growth is 4.6% [2]it is forecasted to have a growth of 13.3% CAGR [3]within 2026 i.e. almost thrice the global average. Adding on to this the toy industry of the country is also expected to reach $3.3 billion dollars by 2024!

India’s economic growth has also increased the disposable income of its citizens, thus driving up demand in a market with a whopping consumer base of roughly 338 million. Moreover, there has been a major shift from traditional, medium- to low-end battery-operated toys, towards innovative electronic toys, intelligent toys as well as upmarket plush toys.[4] The boom of e-commerce in India has also had a role to play, with customers turning to shop for toys within the comfort of their own homes.

Associations and Committees Representing the Toy Industries in India:

 

1.Toy Association of India

  • Headquartered in New Delhi, the toy Association of India was established in 1995 with a view to bringing together toy manufacturers, traders and end-users to promote higher business relations.
  • It has a presence all over the country and has 600 registered members, out of which 275 are toy manufacturers.
  • Assists the toy industry in up-gradation of the industry’s units with modern machinery to maintain quality standards.
  • Attempts at creating a more conducive relationship between the government and the industry by offering policy recommendations, communicating the industry’s problems in the interest and growth of the toy industry.

2.The All-India Toy Manufacturer’s Association

  • Headquartered in Mumbai, All India Toy Manufacturer’s Association has nearly 150 registered members, out of which 100 are toy manufacturers.
  • It seeks financial assistance and subsidies from the government for the growth of the toy industry, educates and encourages suppliers to conform to the BIS regulations. 
  • Encourages the organization of toy fairs and exhibitions for the promotion of the toy industry.

 

Compliances Requirements for Toy Manufacturing Industry under the Bureau of Indian Standards (BIS) 

Apart from the general compliances which amount to over 700 ranging from the Companies Act, SEBI Act, FEMA Act to Income Tax and Foreign Trade Act for factories and MSME’s, regulations were required to be specifically made to ensure that the toy industries are safeguarded from unfair and excessive exploitation as well as products meet the international quality requirements.

According to a study, about 67% of toys sold in India had failed all safety and standard tests, while about 30 per cent of plastic toys failed to meet the safety standards of admissible levels of heavy metals and phthalates. Phthalates are a group of chemicals.

A lack of regulation in the past had resulted in degradation of the quality of our products and failed endeavours to keep up with the international standards. However, this is no longer the case as the government has not only strengthened the existing key factors but has also set up new compliances to steer clear of the past policy miscalculations and lapses. The said compliances are as follows:

The Toys (Quality Control) Order, 2020[5]

Issued by the DPIIT, Ministry of Commerce and Industry, vide order 25 February 2020, the safety of toys has been brought under compulsory BIS certification, which is granted after the successful assessment of the manufacturing infrastructure, production process, quality control, and testing capabilities. The toys shall bear the standard mark under a licence from BIS as per Scheme-I of Schedule II, of BIS (Conformity Assessment Regulations), 2018. The said QCO was initially slated to come into effect from 1st September 2020 but was later extended to 1 January 2021[6].

Exceptions:

  • The order is not applicable to goods and articles manufactured and sold by artisans registered with the Office of Development Commissioner (Handicrafts), under the Ministry of Textiles.
  • The order is not applicable to goods and articles manufactured and sold by registered proprietor and authorized user of geographical indication, by the registrar of geographical indications, Ministry of Commerce and Industry.[7]
  •  Goods or articles manufactured/meant for export purposes.

BIS Licence and Certification

For the purpose of BIS certification, toys have been classified into the following two categories. While applying for a licence, the manufacturer can apply under any one of the classifications:

 

If a licence is required for more than one type of toy (i.e., non-electric and electric), separate applications shall be made for each type. (However, samples shall be tested by BIS for conformity to the primary standard and the secondary standards which are applicable i.e., IS 9873 parts 1,2,3,4,7, and 9 etc.)[1]

While applying for a license the manufacturers must also specify the type of toy in order to choose the applicable standard it would be subjected to. The specifications of toys and their corresponding standards are as follows:

 

For Entities Manufacturing hundreds of toy models/SKU’s
  • Since testing hundreds of toy samples individually shall prove to be practically difficult for the purpose of BIS certification. The issue has been addressed in the Product Manual for the safety of toys[1].
  • The product manual is a guidance document containing product-specific guidelines for certification. It incorporates “Grouping Guidelines” which allows certification to be granted for a group of toy models based on the testing of certain representative models.
  • These grouping guidelines have been framed based on the Indian Standard IS 9873 (Part 8):2019 which is identical with the International Standard ISO/TR 8124-8:2016 (Safety of Toys Part 8 Age Determination Guidelines) which classifies toys into 7 Categories and 146 Sub-Categories based on the appropriate starting age and the specific purpose or function of the toy.
  • For the purpose of certification, all the models of toys of similar design, made from the same materials and covered under a single sub-category, shall be considered as a series. A sample of any one model from each series shall be drawn and tested to cover all the models in that particular series.

Schemes Floated for the Toy Manufacturing Industry in India

Along with the set of existing and new compliances, the government has also introduced various schemes and incentives with the aim of promoting the industry.

Micro, Small, Medium Enterprises (MSME)

Approximately four thousand[2] enterprises in India, engaged in toy manufacturing fall under the category of micro and small-scale sectors. The MSMEs in the toy manufacturing sector is an unorganized sector, accounting for a whopping 60% of the national market share. These MSME’s are spread all across the country with a large chunk operating in the Northern and Western regions.

The Indian toy market is 70% larger thanks to the existence of MSMEs and the support they received from our government. In pursuance of the same, the government has amended the classification of MSMEs in the Aatmanirbhar Bharat Abhiyan to ensure that they receive the aid and recognition required to keep up with the changing times. The amended classification is as follows:

 

With the advent of Aatmanirbhar Bharat Abhiyan various schemes have been introduced to promote MSMEs:

•       Technology and Quality Upgradation Scheme

Enrolling in this scheme will help the micro, small and medium enterprises to use energy-efficient technologies (EETs) in manufacturing units to diminish the expense of production and adopt a clean development mechanism. The scheme guarantees to cover up to 75% of the expenditure.[1]

•       Grievance Monitoring System:

Enrolling in this scheme is advantageous when it comes to addressing complaints of business owners. Additionally, the owners may also check the status of their complaints and file an appeal if they are not satisfied with the result.

•       Incubation: 

It assists innovators in implementing their new design or product ideas. It provides financial assistance for “Business Incubators”. Financial assistance of 75 % to 85 % of the project cost, up to a maximum of 8.00 Lakh is extended to the innovators.[2]

•       Credit Linked Capital Subsidy Scheme:

Under this scheme, new technology is provided to the business owners to replace their old and obsolete technology. A capital subsidy is given to the business to upgrade and have better means to do their business. These small, micro and medium enterprises can directly approach the banks for these subsidies. The ceiling on subsidy would be Rs. 15 lakh or 15 per cent of the investment in eligible plant and machinery, whichever is lower[3]

•       Scheme of Fund for Regeneration of Traditional Industries: 

The government aims at establishing a total of 35 toy clusters in various states under this scheme. Once set up, these will boost the manufacturing of toys made of wood, lilac, palm leaves, bamboo and fabric. This scheme offers incentives such as skill development, capacity building, e-commerce assistance to local industries.

•       Product Specific Industrial Cluster Development Programme: 

The programme aims to establish dedicated SEZ’s and customize them into self-sustaining ecosystems catering to export markets.

 

Incentives Provided to the Toy Manufacturing Industry in India

The Centre and State governments have implemented various incentives to promote the toy industry.

A. For Toy Manufacturing Entities

 

1.Hiked import duty:

The import duty on toys was raised from 20% to 60% [4]making it difficult for foreign companies to compete in our market as well as making Indian companies’ entry into the market easier.

2.Handicraft and GI Toys exempted from Quality Control Order[5]:

This allows any traditionally made toys by artisans registered with Development Commissioner (Handicrafts) to be exempted from the quality compliances newly introduced.

3.Custom Bonded Warehouse Scheme:

Central Board of Indirect Taxes and Customs (CBIC) has launched a new scheme expected to play a critical role in promoting investments in India and in enhancing the ease of doing business. According to this, the unit can import goods (both inputs and capital goods) under a customs duty deferment program.[6]

4.Export Promotion Capital Goods (EPCG) Scheme: 

Enables the import of capital goods (toys/ spare parts thereof) in the pre-production, production and post-production stage without the payment of customs duty.

5.Increase in BCD for Electronic Toys (under HSN 9503) from 5% to 15%[7]:

This will increase the expenditure incurred for foreign companies to sell products in India and thus help relax the competition for Indian manufacturers. An example of how these steps have been implemented and made into a reality is the Product-Specific Industrial Cluster Development Program. An initiative taken up by the Karnataka government in partnership with Aequs Infra, is a first-of-its-kind project aimed at promoting toy industries by dedicating 400 acres of self-sustained ecosystem including an SEZ to serve export markets and Domestic Tariff Area (DTA) through state-of-the-art industrial infrastructure and facilities. It has the potential to create 40,000 jobs in five years and attract over INR 5,000 crore in investments. [8]The toy cluster aims to capitalize on the presence of key elements essential for the sector’s growth like manpower, R&D and raw material.  It is also in a strategic position to cater to 50% of the domestic toy market needs, and has an efficient connectivity network with access to highways, ports, airports, and major cities.[9] This program was touted as a one-stop-shop solution catering to the needs of both large MNCs and small and medium enterprises.

6. Duty Drawback Scheme: 

The scheme was introduced to rebate duty chargeable on any imported materials or excisable materials used in the manufacture or processing of goods, manufactured in India and exported.

B. For MSME’s

Apart from extending financial aid as discussed above, the government initiatives for MSME’s are largely based on undertaking initiatives to promote homegrown toy manufacturers and boost domestic demand for indigenous and locally produced toys. Some of these initiatives are:

Phased Manufacturing Programme (PMP): 

The programme will make the assembly of toys cheaper than imports, offering benefits similar to the PMP for mobile phones introduced back in 2015. The government has offered tax reliefs and differential tariffs among other incentives for components and accessories to push local manufacturing.

Toy Labs: 

In a bid to promote traditional toys, the government has chalked out a plan to create toy labs – a national toy fair for innovative Indian themed toys. The Atal Tinkering Lab is one such toy lab to provide support for physical toys promoting learning and innovation. Additionally, due to literacy programmes like Sarv Siksha Abhiyan and the new education policy, toys nurturing innovation and creativity are in focus.

Involving various sectors:

The education ministry has been asked to include indigenous toys as a part of learning resource, under the new education policy. The IIT’s are set to be roped in to look into the technological aspect of toys, while the NIFT’s shall study the concept of toys and national values, by using non-hazardous materials. The Ministry of Science and Technology has been directed to explore how India’s indigenous games can be featured in the digital space. While the Ministry of culture will work on ‘Indian Toy Museum’.

Labour law reforms:

The Indian toy industry is labour intensive, the new labour law reforms have a significant impact on the ease of doing business, thereby providing a competitive advantage to the Indian toy industries.

The toy industry is one sector that contains a lot of untapped potentials. The compulsory BIS certification as per the Toys (Quality Control) Order, 2020, will ensure that the quality of toys is at par with international standards along with the strengthening of existing conditions of the market. These are significant steps in the right direction to ensure that the domestic markets pick up once the pandemic wanes. The domestic production and sales could catch up with exports and thus make sure that the future of this sector will not be as grim as in the past and will light up, once again.

References 

1 https://www.investindia.gov.in/sector/consumer-goods/toys-manufacturing

2 Koppal Toy Manufacturing Cluster; https://static.investindia.gov.in/s3fs-public/2021- 01/Koppal%20Toy%20Manufacturing%20Cluster%20-%20For%20International%20Investors.pdf

3 Ibid

4 Indian Toys Market: Industry Trends, Share, Size, Growth, Opportunity and Forecast 2021-2026, https://www.imarcgroup.com/indian-toys-market

5 https://bis.gov.in/wp-content/uploads/2020/03/Toy_QC_order.pdf

6 https://dipp.gov.in/sites/default/files/orderToy-26February2021_0.pdf

7 https://dipp.gov.in/sites/default/files/QC-AmendmentOrder-Toys-21December2020.pdf

8 https://bis.gov.in/wp-content/uploads/2020/09/toys-faqs-bilingual.pdf

9 https://bis.gov.in/wp-content/uploads/2020/08/safety-of-toy.pdf

10 Toy industries in India; https://www.ibef.org/indian-toys

11 Impact of Aatmanirbhar Bharat Abhiyan on MSMEs; https://cleartax.in/s/impact-aatmanirbhar-bharat- abhiyan-msmes/

12 https://msme.gov.in/3-technology-upgradation-and-quality- certification#:~:text=Technology%20and%20Quality%20Upgradation%20Support%20to%20MSMEs&text=50%

13 https://msme.gov.in/incubation25%20of%20actual%20expenditure%20subject,licenses%20from%20National%20%2F%20International%20bodies.

14 http://laghu-udyog.gov.in/schemes/sccredit.htm

15 Budget 2020: Govt hikes customs duty on toys, furniture, footwear products; https://www.financialexpress.com/budget/budget-2020-govt-hikes-customs-duty-on-toys-furniture-footwear- products/1848123/

16 Handicraft and GI Toys exempted from Quality Control Order; https://pib.gov.in/Pressreleaseshare.aspx?PRID=1680181

17CBIC and Customs launch scheme to attract investment and support Make in India programme; https://knnindia.co.in/news/newsdetails/sectors/cbic-and-customs-launch-scheme-to-attract-investment-and- support-make-in-india-programme

18 Union budget 2021; https://www.indiabudget.gov.in/doc/budget_speech.pdf

19 https://www.investindia.gov.in/sector/consumer-goods/toys-manufacturing

20 Koppal Toy Manufacturing Cluster; https://static.investindia.gov.in/s3fs-public/2021- 01/Koppal%20Toy%20Manufacturing%20Cluster%20-%20For%20International%20Investors.pdf

 

 

Image Credits: Photo by Nguyen Bui on Unsplash

The toy manufacturing industry is one sector that contains a lot of untapped potentials. The compulsory BIS certification as per the Toys (Quality Control) Order, 2020, will ensure that the quality of toys is at par with international standards along with the strengthening of existing conditions of the market.

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