Supporting Women Entrepreneurship Through Direct Selling

India faces several challenges with respect to providing gender equality and creation of jobs for women. To make the challenge even steeper, women are steadily leaving the work force due to reasons such as marriage, customs and culture, childcare needs and concerns related to safety and security in workplace. According to a report, between 2004 and 2011, when the Indian economy grew at a healthy average of about 7 percent, there was a decline in female participation in the country’s labour force from over 35 per cent to 25 per cent.

According to Sixth Economic Census (2013) of the Ministry of Statistics and Programme Implementation, there are 8.05 million women entrepreneurs in India, of which 2.7 million (almost 33 percent) women are entrepreneurs engaged in the direct selling industry. A survey based study of 180 direct sellers conducted by the authors for the Indian Direct Selling Association (IDSA) found that over 50 percent of direct sellers were women and 31 percent of women direct sellers gave up their full-time jobs after joining direct selling. The survey found that 85 percent were very happy with their direct selling activities. The survey participants pointed out that direct selling activity has helped them to build self-esteem and confidence, foster an entrepreneurial spirit and hone their management skills. It also helps them in improving their interpersonal skills and gives them an opportunity to be the leaders, where they are able to build a team, mentor and train others.

Indeed, direct selling, which is one of the oldest and most traditional forms of selling provides women with a chance to become an entrepreneur, have financial security and self-confidence. Through flexible working hours it takes care of the societal and mental prejudices including lack of family support, child-care responsibility, inhibitions towards travel, networking, etc. For these reasons, the direct selling industry is one of the most preferred sector for women, as it offers a perfect work life balance and yet women can succeed in the arduous journey as an entrepreneur. Absence of infrastructure and operational costs make the industry a viable choice for women from middle and low income groups who have limited access to seed money to invest. 

Despite its contribution, there are challenges to the growth of this industry and hence women entrepreneurship in India. The most daunting challenge for the industry is lack of regulatory clarity. There is no systematic and standard policy on direct selling. Often direct selling companies are mistaken for fraudulent pyramid/ ponzi schemes. States like; Andhra Pradesh, Kerala, Sikkim and Union Territories like Chandigarh, have on several occasions mistook legitimate direct selling companies as fraudulent players because of absence of required regulatory clarification. Such uncertainty is impeding the growth of direct selling companies in India. In many cases, due to absence of clarity, representatives of the direct selling companies have been harassed by the local police and state governments. 

Second, direct selling products are often sold through retail stores. However, it has been seen that, many retailers become direct sellers and start off-loading the products to the customers through retail outlets. This leakage of products through traditional retail channels is contradictory to the very nature of direct selling and needs to be adequately addressed. This channel also encourages the sale of counterfeit products which affect the brand. Such incidences tend to hinder the growth of the industry and can have an adverse effect on consumer confidence. 

Third, many products are imported. High import duties on them add to the price of the product and as a result make them more expensive for the final consumer adversely affecting the demand for such products as they are available at lower prices in international markets. Due to high corporate taxes, high logistics costs and other issues related to Ease of Doing Business, manufacturing in India has not taken off as has been the case of some ASEAN countries and China. 

If these concerns are addressed, direct selling industry is expected to grow to $645 billion in 2025 with a contribution of around $1.31billion to the government revenue. A 2015 study by McKinsey has shown that with equal participation of women in the economy, India’s GDP can rise by 16-60 percent by 2025, which means an addition of $2.9 trillion to the Indian economy. Given the potential of the direct selling industry in generating women entrepreneurship and reducing gender inequality in earnings, regulatory challenges that hinder its growth should be addressed on priority basis.

Arpita Mukherjee

Guest Author Dr Arpita Mukherjee is a Professor at ICRIER. She has several years of experience in policy-oriented research, working closely with the government of India and policymakers in the EU, US, ASEAN and in East Asian countries.

Divya Satija

Guest Author The author is Consultant, India’s Tax Policy Making, Indian Council for Research on International Economic Relations