Direct Selling Industry growth to remain flat during FY14

The direct selling industry, which grew by around 12 per cent in the country last fiscal, is likely to finish 2013-14 with a flat growth, mainly on the back of regulatory hurdles and general slowdown in demand.

The industry turnover in 2012-13 was Rs 7,164 crore. Chavi Hemanth, secretary general of the Indian Direct Selling Association (IDSA) said that while data is yet to be collated, the industry is likely to end this year at the same level as last fiscal. The direct selling industry had grown from Rs 6,385 crore in 2011-12 to Rs 7,164 crore in 2012-13. However, owing to regulatory hurdles, especially in Kerala, the share of southern region in overall revenue had fallen from 38 per cent in 2011-12 to 30 per cent in 2012-13. Total tax paid by the industry has grown by around 20 per cent in 2012-13, at Rs 987 crore.

The northern region contributed the most to overall revenues, around Rs 1,934 crore, registering a growth of 33 per cent. But, there was a negative growth of 30 per cent in the turnover in the southern region.

The issue of prize chits and several money circulation schemes have hit the industry's growth down south. The western region contributed around Rs 1074.6 crore during FY13. Its growth rate tapered down from 19 per cent in 2011-12 to 9 per cent in 2012-13.

However, at the same time, a recent report by the PHD Chambers of Commerce and Industries says that sales revenue will rise to Rs 10,843 crore by 2014-15 from the present levels. Hemanth added that in the coming years the direct selling industry would continue to grow, at an annual average rate of about 20 per cent. "Keeping the current trend we will continue to aim high despite regulatory or economic hurdles and as per the report the Industry will grow approximately at 20 per cent year-on-year," she said.

Amarnath Sengupta, Chairman of IDSA  said, "For self employment opportunities, approximately 6 million distributors in India are associated with direct selling companies in India. Out of these, women constitute 60 per cent of the total sales force."

The report, however, points out that at present, the country is faced with several challenges to its growth; high inflation, stagnating manufacturing output, high fiscal deficit, widening current account deficit, volatility in the exchange rate scenario, a sluggish investment environment, poor availability of skilled manpower, slow employment generation and inadequate poverty alleviation which has impacted directly or indirectly the direct selling Sector.