Experts share views for regulatory framework for Direct Selling industry in FICCI knowledge forum

FICCI FMCG Division that has continuously been working on critical industry issues organized a forum aiming to address concerns and issues related to Indian Direct Selling (DS) industry.

Eminent industry experts congregated at FICCI, New Delhi to express their views on the potential and legitimacy of an industry which currently engages over 7 million people in the country and has the prospect of spurring economic activity in the country.

Dr. Didar Singh, Secretary General, FICCI threw open the discussion in front of the panel including Dr. Bibek Debroy said “major problem the Direct Selling Industry faces is lack of disintermediation. Direct Selling Industry needs a law which should be fundamentally be a state level law. The direct selling industry has been on a high-growth trajectory notching up a remarkable double digit growth in the past few years. As per recent reports, the industry has reached a turnover of INR 6,385 crore in 2011 – 12. Focused on the growth drivers and Direct Selling industry’s potential of generating employment opportunities whilst contributing to the economic growth, the discussion started with views of Dr. Debroy, Indian economist who has authored the Study on “Direct Selling in India: Appropriate Regulation Is The Key” said, “Overall, India needs a more systematic policy on DS that is based on its own constitutional structure and also the realities and idiosyncrasies of the Indian economy. Unlike business models, however, the economic policy framework needs to be evenly spread across the country, and therefore the central government needs to play a leadership role in many areas. DS and MLM is one such domain, since sales and marketing in the new economy will necessarily be many times across borders, a common framework would help in creating a fracture-less marketplace.”

The Indian direct selling industry has been growing on the back of demand from the wellness, healthcare and cosmetic categories and today accounts for 35.8% of non-store retail sales, 4.41% of organized retail sales and 0.07% of GDP. Whereas countries like United Kingdom, United States of America, Thailand, Malaysia, Vietnam, Hong Kong, Singapore, and other countries across the world have already established MLM/DSI business with comprehensive law legitimizing the industry providing absolute clarity on the types of businesses are permissible and what are not it’s a well-known fact that MLMs in India currently do not come under any Indian regulator. And in the absence of a confused regulation the industry with no definition in the statutory books of India on the business of direct selling, the industry is being tainted by the alleged wrongdoing of many fly-by-night operators misusing the concept.

Talking about key policy initiatives that should be considered by the Government of India, to recognize the industry’s achievements, Dr. Arpita Mukherjee, Professor ICRIER emphasized the there is a need for a model act on Direct Selling.

Mr. Dilip Cherian, renowned Image Consultant stressed upon the dire need of changing the industry imagery in the eyes of Government. He also mentioned about the need of strong image management besides a strong regulation as perception is one of the strong building blocks for a successful industry.

Mr. Bejon Misra, Consumer Policy Expert commented, “In the entire dialogue with the regulator, the consumer voice is not heard. Customer promises should be met and delivered the way he or she wants. In India, Direct Selling Industry has been providing consumers with a choice of quality products, being sold at their door-steps by a known person, at the most affordable price, with a guarantee of money back policies, ensuring consumer interest protection. As an additional channel, it is leading to disintermediation, reduction in transaction costs and bridging the gap between consumer prices and manufacturer prices (not so much for him)”

Further emphasizing, Head FMCG Committee, FICCI said, “India needs to have a specific statute that regulates and facilitates direct selling industry like other fast growing economies such as Thailand, Malaysia, Korea, Indonesia, China, Vietnam, Japan, Taiwan and Singapore. The recent developments in the sector have made it crucial for the Government to make a clear distinction between legitimate and illegitimate direct selling companies in India”.

The discussion resulted in formulating thoughts, ideas and solutions to get industry recognition for the Direct Selling industry and help establish it as a genuine and legal business model.

Other key speakers from the industry were Prof D. B. Gupta, Economist; Professor Piyush Kumar Sinha, Professor IIM- Ahemdabad; Raghav Gupta, Principal, Booz Consultancy; Mr. Deep Chand, Retd. Spl. Commissioner, Delhi Police.

Dr. Didar Singh, Secretary General, FICCI said that FICCI Direct Selling Sub-Committee will work till the end to get the clarity on the legislations governing this Industry.

FICCI CASCADE RELEASES KNOWLEDGE PAPER WITH ERNST & YOUNG ON “COUNTERFEITING, PIRACY AND SMUGGLING: GROWING THREAT TO NATIONAL SECURITY”

FICCI CASCADE today released a knowledge paper with Ernst & Young on “Counterfeiting, piracy and smuggling: Growing threat to national security”. A detailed report in collaboration with Business Action to Stop Counterfeiting and Piracy (BASCAP) on “Counterfeiting, Piracy and Smuggling in India – Effects and Potential Solutions” was also unveiled.  The conference was organized by FICCI-CASCADE (Committee Against Smuggling and Counterfeiting Activities Destroying the Economy) & Business Action to Stop Counterfeiting and Piracy (BASCAP) an initiative of the International Chamber of Commerce (ICC), with the aim of promoting a better understanding of the socio-economic consequences of counterfeiting, piracy and smuggling and the impact on national security.

Inaugurated by Shri Jesudasu Seelam, Minister of State, Ministry of Finance, Government of India, the conference was addressed by Shri Saumitra Chaudhuri, Member, Planning Commission, Government of India, along with other leaders from government and industry.

FICCI CASCADE along with Ernst & Young has also taken another step in the direction of deepening its understanding of the extent of the illegal trade in counterfeit pirated and smuggled goods and its impact on the society. The organisations presented a knowledge paper dwelling on the nexus of terrorism and illegal trade in counterfeit, pirated and smuggled goods. The report, titled, “Counterfeiting, piracy and smuggling: Growing threat to national security”, highlights the drivers of financing of terrorism and how activities such as counterfeiting, piracy and smuggling have become channel for sustaining criminal and terrorist activities. It analyzes and provides insight into the links between counterfeiting, smuggling and financing of terrorism.

BASCAP, in partnership with FICCI CASCADE, also released a report at the conference titled “Counterfeiting, Piracy and Smuggling in India – Effects and Potential Solutions”, which highlights the serious issues in India and recommends actions to be taken to stop the illicit trade in fake goods. The report calls on Government to strengthen enforcement of trademark and copyright laws and regulations. Enforcement was consistently cited by industry as the key element missing in developing a stronger national intellectual property strategy for India.

“Combating counterfeiting and piracy must become a public policy priority in India,” said William Dobson, Deputy Director of BASCAP.  “This effort must start with the government sending a clear message this activity will no longer be tolerated – backed up by increased enforcement of India’s IP laws.”  “India’s leaders have recognized the importance of fostering creativity and innovation as a key to future economic growth,” Mr. Dobson said.  “However, the full value of such innovation can only be recognized if there is a clear legal and regulatory system that protects the intellectual property rights of the creators, inventors and innovators.  India has a strong IP regime in place, but must do more to strengthen enforcement of these regulations,”FICCI CASCADE and BASCAP prepared the report to raise awareness of the serious consequences of the increase in counterfeiting, piracy and smuggling  in India, and the need for more Government attention to the issues, at the Central, Regional and State levels. The paper briefly reviews the economic and consumer consequences of trademark and copyright infringement; provides specific sector evidence of the scope of the problem in India; and finally, based on interviews with Indian rights holders and multinationals, provides specific recommendations to improve enforcement of IP protection laws and regulations in India.

Counterfeiting and piracy is a global problem, causing enormous costs and serious impacts Markets for illicit goods and services are an escalating problem that adversely impacts legitimate industries, public health and consumer trust, government revenues and economies as a whole. Counterfeit, pirated and smuggled goods contribute to the proliferation of diseases and accidents, generate revenue for organized criminal networks, and are a factor in regional instability, unfair competition and safety threats. This represents a significant threat to countries and in particular large emerging economies such as India. It is estimated that two billion individuals in the world are directly affected by non-compliant consumer products, especially by fraudulent food and counterfeit medicines, causing injury, poisoning and, in many cases, death. This conference will explore the economic consequences of mass counterfeiting, piracy and smuggling and the policies needed to deter this activity. Discussions will contribute to an integrated vision of State security and public safety, providing an interdisciplinary dialogue which will attract industry regulators, state agencies, customs authorities, law enforcement, and major producers of consumer goods, consumer associations and NGO’s.  Speakers from international and intergovernmental organizations, including the World Customs
Organization (WCO), World Intellectual Property Organization (WIPO), Beiersdorf A.G., Germany, Microsoft, HP, HUL, Croplife International, Global Anti-counterfeiting Group, will be sharing their expertise and experiences with the delegates from India and other countries.

BCG Launches New Report: 'Consistency, Quality and Resilience : The Next Frontier for Productivity Excellence’

The annual FICCI & IBA Banking Conference (FIBAC 2013) is being organized in Mumbai on 13th - 14th August on the theme “Productivity excellence in Indian banking”. The Boston Consulting Group (BCG), the knowledge partner for FIBAC 2013, has prepared a report titled "Consistency, Quality and Resilience: The Next Frontier for Productivity Excellence".  This report has been prepared with extensive research including surveys, conducted jointly with FICCI and IBA, of over 500 corporate customers and analysis of data obtained from 38 of the largest banks in the country.

Salient points of the FIBAC 2013 report:

•    A big thumbs up for Indian banks from their corporate clients
o    At 21%, the advocacy score is among the best seen globally
o    High appreciation for quality or relationship management, branch distribution and flexibility

•    Industry feedback to banks:  Improve operations and IT; Innovation is biggest weakness
o    Improvement needed in operations quality viz. turnaround time, exception handling, innovation, customization.  Innovation rated as the biggest weakness of Indian banks.
o    At 2% of revenue, IT expenditure of Indian banks is among lowest in the world
o    For every 1 customer facing person, Indian banks have 1.2 non customer facing persons.  This should be less than half of this level (i.e. for every customer facing person, less than 0.5 non customer facing person).

•    Lenders do not get lion's share of wallet; transaction bank does
o    The primary banks for corporate is the one who provides the main current account
o    Public sector is primary lender; it is not a primary transaction bank

•    Public sector has disproportionate exposure to traditional capital intensive industries

•    Gold based lending by banks could help double the agriculture credit in India profitably
o    Rs 4.2 trillion of additional credit possible in direct agri lending using gold as collateral

•    Banks paying heavy price for ignoring information analytics and IT based credit management
o    Banks sit on massive data regarding customer transactions in core banking systems. This can be leveraged for early warning systems
o    In India, surrogate information has to be also used
o    Banks need to build in-house capability in credit scoring and early warning systems – not rely on externally purchased models
o    Information bureau has played a role in steady reduction in retail lending NPA. More aggressive adoption of credit bureau needed in MSME, agriculture and retail banking.

•    Restructuring of corporate debt (CDR mechanism) needs a major revamp
o    Banks need capability to do deeper strategic due diligence of problem accounts to locate tough management actions needed for turn around
o    Need oversight mechanism to ensure management follows through on tough decisions in operational turn around

•    Despite introduction of digital channels, Indian bank branches are 10% more cluttered in 2013 compared to 2011
o     Number of cash transactions per day per branch has gone up for all type of banks
o    Banks need a fresh look at branch formats with more self–service and new technology based formats
o    Digital adoption needs greater push as banks move into semi urban and rural areas

•    Electronic Point of Sale (POS) transactions a major weakness of Indian banking
o    Share of POS transactions in total digital transactions remained flat between 2011 and 2013
o    Public sector has virtually abdicated its role in extension of card acceptance in merchant establishments.  Penetration of POS acceptance very low in India
o    Banks need to take advantage of new technology and services from National Payment Corporation of India (NPCI) like RuPay and IMPS

•    Small businesses not adopting digital enough
o    For Current Accounts holders, number of digital transactions were only 21% of total transactions as against industry average of 62%
o    In private sector banks, the number of cash and cheque transactions per Current Account increased between 20011 and 2013

•    Private Sector hit a plateau in digital adoption; PSU banks did 4 times better between FY '11 and FY '13
o    15% improvement in digital adoption in private sector banks as against 60% for public sector banks between 2011 and 2013
o    Digital adoption defined as ratio of digital transactions to non digital transactions (cash and cheque)
o    Digital adoption ratio in Private banks up to 2.3 in 2013 from 2 in 2011; PSU banks up to 1.6 in 2013 from 1 in 2011
o    Private sector banks need fresh thinking to move the needle in digital

•    The report expects Business Correspondent (BC) per branch  to reach 10 by 2020 from 0.9 today
o    Public Sector has a strong lead in BC channel
o    The "New" New banks, coming in with better technology, expected to take the lead in rapidly expanding their BC network

•    Public Sector bank reform needs urgent attention
o    New bank licensees would put enormous competitive pressure and accelerate erosion of market share and profitability. We have a 3 year window.
o    Current massive hiring pattern would create complex challenges in next decade especially compounded if growth rate slows
o    Talent shortage is a critical issue. Banks need lateral induction of talent.
o    Outsourcing should be evaluated for noncore functions

Mr K R Kamath, Chairman, Indian Banks' Association (IBA) and Chairman and Managing Director, Punjab National Bank (PNB)speaking on the occasion of curtain raiser for the event said that "These are interesting times for Indian banking industry.  We have significant challenges and lots of exciting opportunities.  Indian banking industry will come out stronger through this phase of its evolution".  Mrs V R Iyer, Chairperson of FICCI’s Banking and Financial Institutions Committee and Chairperson and Managing Director of Bank of India  said on the occasion that "Indian corporate clients have given a strong positive endorsement to Indian banks and have highlighted issues on operations and technology that we need to look at carefully".  In a first of its kind, FICCI had facilitated the survey of over 500 of its members to get a structured feedback on Indian banks and identify areas of improvement.  Speaking on the occasion, Saurabh Tripathi, Partner & Director, BCG, mentioned that "Contrary to widespread negative sentiments, our research found many reasons to cheer the achievements of banking industry".  Indian banking industry has improved digital adoption, reduced reliance on wholesale debt, decreased its leverage, and maintained cost income ratio at about 45% which is among the best in the world.


About the organizers:
Federation of Indian Chambers of Commerce and Industry (FICCI), established in 1927, is India’s largest and oldest apex chamber with an indirect membership of over  2,50,000 companies, from various regional chambers of commerce, from the corporate sector, both private and public, including SMEs and MNCs.  FICCI works closely with Central and State governments and regulatory bodies for policy change and is the voice of India’s business and industry. For more information please visit www.ficci.com.

Indian Banks’ Association (IBA) is the premier service organization of the banking industry in India. Its members comprise of almost all the Public, Private, Urban co–operative and Foreign banks having offices in India, developmental financial institutions, federations, merchant banks, housing finance corporations, asset reconstruction companies and other financial institutions.

The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not–for–profit sectors in all regions to identify their highest–value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization.
This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 77 offices in 42 countries. For more information, please visit www.bcg.com.