Direct selling contribution to govt revenue set to increase 9 fold

Going forward, the industry has the potential to reach a size of Rs 64,500 crores by 2025.

The FICCI-KPMG report on the direct selling industry in India, released by Ram Vilas Paswan, Union Minister of Food, Public Distribution and Consumer Affairs, in Delhi today at a FICCI conference - "DIRECT 2014", indicates that the direct selling industry has the potential to provide self-employment to 18 million.

Sidharth Birla, President, FICCI commented on the occasion saying, "The industry holds large potential not only for the economic, but also social development of India. With growth in the industry, it is projected to employ nearly 1.8 crore direct sellers, with almost 1.1 crore of them as women. The industry is also expected to contribute a tax of Rs 9,000 crore to the exchequer. Hence, it is important that the growing economy like India should encourage rightful emerging businesses by creating a favorable policy environment."

The report indicated that with the right policy stimulus, this industry might well reach its potential of Rs 64,500 crores, an eight-fold increase in twelve years. Minister Paswan released this report along with Keshav Desiraju, Secretary Consumer Affairs, Sidharth Birla - President of FICCI, Kurush Grant ED of ITC, as well as other industry representatives.

The FICCI conference was attended by a number of India and global industry dignitaries and other stakeholders.Direct selling is a global industry, operating in over 100 countries with a market size of $167 billion. It refers to the selling of goods and services to the consumers away from a fixed retail outlet, generally in their homes, workplace etc., through explanation and demonstration of the product by direct sellers.

USA, Japan and China are key markets for the industry. Back home in India the market is estimated to be around Rs 7,200 crores, which is a far smaller percentage of the size of the economy, when compared to other countries. The FICCI-KPMG white paper launchedtoday highlights the challenges faced by the industry in India, and suggests a roadmap for enabling the industry going forward.

At the release, Union Minister said, "My Ministry is working towards creating a regulatory framework for the emerging industries like e-commerce and direct selling- under our internal trade reforms agenda, through which we can help in distinguishing between the genuine and fraudulent players, and our key concern is to safe guard the interest of consumers."

Secretary, Desiraju further said, "We are hopeful that the proposed changes to the Consumer Protection Act will strengthen consumer welfare. There is a need to differentiate direct selling from other fraudulent schemes masquerading in the market as direct selling. With internal trade falling under the Ministry of Consumer Affairs as per the allocation of business the Ministry seeks to play an important role in regulating activities which impact on consumers. The industry needs to have a regulator to look at its issues more closely and resolve them."

According to the report, direct selling is one of the fastest growing non-store retail formats in India, recording double digit growth of more than 20 per cent over the past five years. In the year 2012-13, it has been estimated to contribute taxes of Rs 1,000 crore to the exchequer.

Besides, the industry also has a significant impact on socio-economic parameters because of its nature. In less than two decades, since it took-off in India, it has provided self-employment opportunities to more than 50 lac people in India as direct sellers.

Nearly 60 per cent of these direct sellers are women, thus empowering them with additional income and transferable skills. The industry also generates direct employment through manufacturers and other service providers involved throughout the value chain of the industry.

The industry has led to technology percolation and enhancement of many SMEs by association with international companies. Also, many direct selling companies have been in the forefront by actively contributing towards social activities.

Going forward, the industry has the potential to reach a size of Rs 64,500 crores by 2025 driven by growth in the consumer markets and increase in the penetration of direct selling to globally comparable levels. This will have a cascading effect on the socio-economic parameters associated with the industry. There will be commensurate capital investments in manufacturing and in technology acquisition.

The report also highlights the need to bring regulatory certainty for the industry, which is mistakenly coupled with fraudulent money circulation schemes because of a lack of clarity in existing legislations. The report also lays out a roadmap for mitigating the regulatory challenge for the industry by recommending an immediate amendment in the governing legislation, followed by a clear definition and categorization as 'wholesale cash and carry trade' to smoothen FDI inflow, and an independent legislation and nodal ministry for the industry thereafter.