if the return gifts are for huge nos (50+ atleast), then check out at Parrys cornor.... u will have lot of choices & rate would be very economical too.

Last apr, for our son's first b'day, we got "Juniors Art pack" from a shop there... it has complete art set (paint, sketch, color pencil, crayons - around 50 pieces in total) and we got it for Rs 40 per pack. You can also get lot of kids - lunch bags, fancy water bottles, plates / coffee mugs with cartoon characters on it.

If the nos are not very high, then you may check the same collections at shops near Pondy Bazzar flower market... there are 4-5 shops exclusively catering for birthday gifts & packages

a colouring book and crayon set for young children, a piggy bank for the next category is what comes to my mind rt now..

For my daughters birthday, we bought the stationery set (with pencil, sharpeners, erasers, scales etc., ) with barbie dolls / Dora / spiderman / superman on them.... These costed around 25 per pack and got them from TNagar Saravana Stores... As anu pointed out you can go to either Parry Corner or TNagar and you yourself will find a lot of new gift items which are affordable... For another occassion we got foldable plastic fans (Kai visiri's) - Just like the japanese fans...  with a lot of designs on them... It also had a measurement scale which can be used by school going kids....

 u can give some puzzle cards

The return gifts depend on the age group of kids u r inviting and ur budget....whatvr the gift be , u can always add a few chocolates...pack it in a nice happy b day return gift cover/wrapper

For my daughter's first b day- crayons pack frm faber castle,and stationery kit which had scale,pencil,sharpener,eraser with cartoon characters engraved+ chocolates

2 nd b day- i was jus back frm US- had picked up clorg pencils and chocolates frm there+animal shaped small snack boxes

3 rd b day- most of them were frm her school and kids of her age- so it was rhymes CD,proper 2 compartment snack box with spoon n fork,chocos, chocolates

Other ideas wud be coloring sets, coloring books, balls,for girls- accessories,story books, puzzles,learning books,stickers,posters