In a toy shop in Mumbai today, a child's building blocks are far more likely to carry a "Made in India" label than they were six years ago. That shift did not happen by accident. In 2019, India began raising tariffs on imported toys, from 20% to 60% and eventually to 70%, while tightening quality checks to block substandard imports. Retailers warned that local manufacturers would never compete.

Instead, Indian toy imports fell by a third, from nearly $300m in 2020 to around $100m this year, while exports nearly doubled to $200m. China's grip on the sector, once worth 70% of India's toy market, has loosened considerably. That success, however, is the exception rather than the rule. Since the deadly Galwan Valley border clashes of 2020 froze diplomatic relations between New Delhi and Beijing, India has banned Chinese apps, imposed anti-dumping duties, and tried to wean its industries off Chinese inputs.

Yet its trade deficit with China has grown from $44bn to $112bn over the same period, according to figures cited by trade analysts. Exports to China remain below pre-pandemic levels, while imports have doubled, leaving Beijing supplying more than 30% of India's industrial imports and over 100 goods that Indian industry considers critical. "India's economic dependence on China continued to deepen while political, security, and investment ties were at their lowest point," said Kevin Zongzhe Li, a fellow at the Asia Society Policy Institute's Centre for China Analysis. Ajay Srivastava of the Global Trade and Research Initiative in Delhi warns the deficit could reach $134bn if current trends hold, handing Beijing still more leverage over Indian manufacturing.