Companies

Direct selling industry needs policy stimulus: ICRIER

Our Bureau New Delhi | Updated on March 18, 2011 Published on March 18, 2011

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The direct selling industry or non-store retail format in India needs Government support for the sector to sustain its growth. Besides seeking a nodal agency to formulate legislations, the sector has also sought streamlining of foreign direct investment policy to find a firm grip in the domestic market.

ICRIER, which brought out a report on ‘ Socio-Economic Impact of Direct Selling: Need for Policy Stimulus', said, “With economic development and growing consumerism, the consumer market in India has undergone a significant change and direct selling as a category is growing fast.”

The report observed that the Government must come out with a clear provision to define the direct selling industry. “There is no clear and holistic definition of the direct selling industry and the classification of direct selling is also unclear … It is neither a part of retail nor wholesale trade and shares properties of both retail and wholesale. Some experts, therefore, believe that it should be a specialised channel of distribution,” the report said.

Industry growing

Mr Ashwani Kumar, Minister of State for Planning, S&T, Parliamentary Affair and Earth Science, who released the report, said despite being a new sector, the direct selling industry is growing at around 20 per cent and companies are spreading their operations to Tier 1 and 2 cities.

Industry speakers said issues that concern the sector include random sales of products outside the direct selling network, lack of entry barriers for unscrupulous entities, and fraudulent schemes by such entities that mask themselves as direct selling opportunities.

The retail industry, on the other hand, has well laid out norms and legislations. For example, at present, the Government caps foreign direct investment (FDI) in single-brand retail at 51 per cent, while FDI is prohibited in multi-brand retail.

It also said that the sector will benefit if partial FDI is allowed in multi-brand retail, as there will be more clarity on the entry route.

It also stressed the need for a nodal ministry. “Companies are not sure whether it is DIPP or Ministry of Consumers Affairs, Food and Public Distribution that governs them … Also, at present, there are many fraudulent companies that operate under the garb of direct selling. This issue can be addressed if there is a nodal ministry and a governing legislation,” it said.

The ICRIER report is based on a primary survey of over 2,500 stakeholders covering direct selling companies, direct sellers, consumers, manufacturers and policy makers. In 2009-10, India ranked 11th among the top direct selling countries in terms of direct sellers, and has approximately three million direct sellers. The Indian direct selling market is expected to touch Rs 71,500 crore by 2013.

Published on March 18, 2011
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