Thanks for the advice everyone
I probably didnt point this out enough in my OP but I dont think (obviously) that this is DD's problem or making,s he has just been responding to what is going on around her. And of course, I dont want to seem ungrateful to my parents, there are times when they have bought her some lovely things, she has been over the moon or they can treat her to bits when we do/have fallen on tougher times. However that all said this really doesnt sit well with me - the gifts are excessive.
ZuleikaD what did you MIL say when your DD greeted her with that? I thought after DD saying 'presents' to DM that she would actually realise what i have been going on about but the point seemed to be missed somehow.
Savoycabbage Interesting point about the DC at your DD's school. My brother has a step-son, aged 14 now and my DM has always made a point of spoiling him a bit too much too. So now for example, he always expects a trip to MacDonalds or to buy a computer game. or to be able to ask my mum for anything for long enough and pester her so she gets it. Its a tricky situation as neither my brother and sister in law (SIL in particular) work very hard for what they have and she has said before that she will be saving for something for her son, like a new mobile phone he wants, and before she can quite afford it, my parents have swooped in there to "save the day" and buy it for him. I think this totally undermines the parents and also means that my Nephew learns nothing about having to wait for things and save up.
Mummytime interesting idea that. Thing is we live very close to my parents, so in some ways that does make it worse because sometimes we will see them everyother day or a couple of days in a row and there will be something new each time 
Westwinger yes you are right, that is part of the problem about toys being cheap or everything being branded. So DM will come round with Peppa pig this, and Peppa pig that. It also means when I treat DD to something, (like recently I got her a fuzzy felt type book in M&S as I had some gift vouchers to pay for it & thought it would be a good one to have in my bag for us waiting around etc) so Dm sees it and says she has to get DD one for her house. This makes my treat for her seem less so. DD has tons of toys at GP's house, including a playhouse in thier garden. Again I dont want to seem ungrateful but she isnt even 2 yet and i just feel its all too much.
DD also has 2 savings accounts which the GPs can make a deposit in, regular or ad-hoc, i've given her the details but they haven't made a deposit just still choose to buy her stuff all the time.
Fanjo I like the idea of the present box. You are right & it would make GP's realise what they are spending & the frequency of it all.