An Introduction to India
In the words of Mark Twain, the American author and humorist, “India is, the cradle of human race, birthplace of human speech, mother of history, the grandmother of legend, & great grandmother of tradition. Our most valuable & most instructive materials in the history of man are treasured up in India only.”
Perhaps there could not be any better words to describe India. An ancient land that is the 7th largest country in the world, India covers an area of 3.28 million sq. kms., extending from the Himalayan heights in the North to the tropical rain forests in the South.
From the setting up of the world’s first residential university in Takshila in 700 BC with over 10,000 students from different parts of the world; to the point where it has the largest numbers of engineers and engineering education institutes in the world; India has come a long way. What was once believed to be the ‘land of snake charmers’, India takes pride in being termed as the global IT superpower.
India has over 780 surveyed and documented languages and is the world’s second-largest English-speaking country. People of diverse religions and cultures have been living together for many centuries perfectly demonstrating ‘Unity in Diversity’.
Indian Economy
Since Indian independence in 1947, the Indian economy has passed through several phases to reach a point where it will be the fastest-growing large economy in the world in the coming years.
At the time of independence, the share of the Indian economy in the world economy was estimated to be around 3.8% and grew at an average rate of 3.9% in the decade that followed.
In the 1960s, owing to several challenges like the India-China war in 1962 and the India-Pakistan war in 1965 followed by two consecutive droughts in 1965 and 1966; the growth remained stagnant at around 4%.
The growth dropped to about 2.9% in the 1970s before witnessing a correction in the 1980s due to several reform measures taken by the government. Average growth of 5.7 % during this decade was further supported by measures like the famed LPG policy (Liberalization, Privatization, and Globalization) in the 1990s during which the growth averaged 5.8% per annum followed by a decadal average growth rate of 6.3% in the 2000s.
In Financial Year 2023-24, as per current estimates by the National Statistical Office, the Indian economy is estimated to have grown by 7.3% as against 9.1% growth in FY 2022-23.
One thing that can be said with a fair bit of conviction is that India’s economy is of importance not just for Indians but for the entire world. Despite some inherent issues, the fact remains that India is the world’s fifth-largest economy and is growing at a steady rate. In the words of Finance Minister Nirmala Sitharaman, “India’s GDP has reached $3.75 trillion in 2023, from around $2 trillion in 2014; moving from 10th largest to 5th largest economy in the world. India is now being called a bright spot in the global economy”.
Why India Matters
India has several things going in its favor that not only give it a strategic advantage over other nations but also plan a pivotal role in its emergence as the fastest-growing large economy in the world.
The first and foremost is India’s vast young and dynamic population. In easy terms, this translates to the availability of skilled manpower and a society that is aspiring for growth. India has the largest youth population in the world and this population is striving for excellence in modern work skills particularly IT. This leads to the second advantage for India i.e. her positioning as the global IT and ITES hub. The IT and BPM sector contributes significantly to India’s GDP and new startups are fuelling its growth further.
For businesses like direct selling, the biggest advantage India offers is its rising middle class. The share of the Indian middle-class population is expected to reach 61% of its total population by 2047 which would translate to over 1 billion people.
A large and significant middle-class population presents a favorable opportunity for the growth of the retail sector and its segments like e-commerce and direct selling. Retail contributes more than 10% to the Indian GDP and as per the estimates by the Boston Consulting Group, the retail sector in India is expected to reach US$ 2 trillion in value by 2032. To conclude, it would not be wrong to say that the future lies in India and no corporation can afford to exclude India from their growth plan.
A Brief Introduction to the Indian Direct Selling Industry
The direct selling industry in India is believed to have commenced its operations in the early 1990s when some US-based direct selling entities started their operations here. In the mid-1990s, the government of India relaxed FDI terms which provided impetus to this, and in addition to international direct-selling entities, many Indian direct-selling companies were also incorporated.
However, due to the lack of a specific regulatory framework, the direct selling industry was subjected to the provisions of other existing acts, the most important being the Prize Chits and Money Circulation Scheme (Banning) Act 1978. Considering the representations made by the direct selling industry advocating for enactment of a regulatory law, the Government of India took several initiatives over the next two decades which included setting up Inter-ministerial committees and Inter-ministerial groups to look into the matter and making recommendations to the government.
All these initiatives culminated in the notification of Direct Selling Guidelines 2016 by the Department of Consumer Affairs under the Ministry of Consumer Affairs, Food & Public Distribution. The guidelines were issued under the provisions of the Consumer Protection Act, 1986; in the form of an Advisory to State Governments / Union Territories. The guidelines provided important definitions related to various aspects of the direct selling business and a detailed understanding of how direct selling is differentiated from Pyramid Schemes. Consequently, 17 States adopted the advisory and notified their respective guidelines for regulating the business of Direct Selling and Multi-Level Marketing.
To keep up the pace with the changing global scenario and to address the shortcomings of the 1986 Act, the Government of India notified the Consumer Protection Act 2019. The 2019 act, inter alia other things, defined ‘Direct Selling’ thereby clarifying the nature and meaning of it. This was a significant development as this marked the first time when Direct Selling found a mention in an Act notified by the Government of India.
Under the powers vested with the government in the 2019 Act, the Department of Consumer Affairs notified the Consumer Protection (Direct Selling) Rules 2021 which at present are the regulating law for the industry. The direct selling rules were subsequently amended by notification of Consumer Protection (Direct Selling) (Amendment) Rules 2023 after incorporating some suggestions from the industry.
To summarize, the present situation concerning the regulations of the direct selling industry in India involves both the Central Government which notifies the rules and amendments; as well as the State Governments as they are required to set up monitoring mechanisms for ensuring compliance with the rules.
Future Outlook for the Direct Selling Industry in India
The Indian direct selling industry is making its presence felt on the global platform. As per the data published by the World Federation of Direct Selling Associations (WFDSA), in terms of estimated retail sales, India was placed at the 15th spot in the year 2019. Since then, India has moved up to the 11th spot in 2022 and is expected to find its place within the top 10 markets in the next few years. The important thing to mention here is that amongst the top 15 markets, India has registered the highest compound annual Growth Rate of 13.3% over a period of last 3 years.
As per the latest data released by the Indian Direct Selling Association (IDSA), in the Financial Year 2022-23 (i.e. year ending March 31, 2023) the Indian direct selling industry registered a gross turnover of INR 212,820 million while registering a year-on-year growth of 12%, amongst the highest in the world. The growth is largely driven by the wellness segment which has a 73.5% share in gross sales, followed by the Cosmetics segment with about 11.3% share.
In terms of the number of direct sellers, the Indian direct selling industry has been able to reap the benefits of its large population. While the total number of direct sellers is well above 10 million, the number of active full-time direct sellers as of March 31, 2023 stands at 8.6 million as per the results of IDSA Annual Survey 2022-23 for Direct Selling in India.
A significant deviation from the global scenario is concerning the ratio of men and women direct sellers. While globally, the number of women direct sellers is more than the number of men direct sellers, however in India this trend started witnessing a reversal in 2018-19. As of March 31, 2023; against 37% women direct seller strength, Indian direct selling has 63% men direct sellers. Further, people from all age groups are part of the industry with people in the age group 18 – 34 forming up nearly 44% of the total strength.
With a robust regulatory
framework in place, the future for the growth of the direct selling industry in India appears promising. However, like many other nations, India, too, faces the challenges of fighting a perception war concerning how the industry is viewed by the regulator and public at large. Due to the lack of a centralized registration mechanism, there’s little control over who can undertake the direct selling business. While State governments are contemplating the introduction of such a mechanism as part of their responsibilities under the Direct Selling rules however how such a mechanism will work and what would be their effectiveness, is yet to be seen.
Conclusion
The Indian direct selling industry has successfully overcome the challenges posed by the Covid-19 pandemic. The pandemic has resulted in Indian domestic companies adopting digital methods of doing business thereby making them a formidable competition for the international players. Despite of its attractiveness and potential, over half of the top 30 global direct-selling companies are yet to enter the Indian market. Needless to mention, with new international companies coming in and domestic players scaling up their operations, the direct-selling industry is poised to get benefited.
With a large consumer base, India is already the world’s largest market for manufactured goods and services and thus it is high time that India needs to be included in the growth plans of direct selling companies. The future would be here, how long can you afford to ignore it, is the question to be asked.
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Written by Chetan Bhardwaj. Chetan heads the secretariat of the Indian Direct Selling Association as its General Manager. A Physics graduate from University of Delhi, he also holds a post-graduation in Business Administration. A gold medallist from the prestigious National Law School of India University, Bengaluru in Business Laws, he is working on the issues concerning the direct selling business with the industry players, the government, and the consumers at large.
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