Few gains, many losses: Industry comes to terms a month since demonetisation
Not just day-to-day life, the ban on Rs 500 and Rs 1,000 notes has also led to a decrease in sales, with mobiles, footwear, property and hospitality sectors bearing the bruntindia Updated: Dec 09, 2016 09:10 IST
A month and two paydays after Prime Minister Narendra Modi stunned the country by announcing the cancellation of old Rs 500 and Rs 1,000 notes, the debate over its gains remains undecided. You are advised not to engage in this debate the people who are part of queues outside banks and ATMs, which remain long, or those who have lost their jobs.
The standing committee on labour has sought a report from the government over job losses and non-payment of wages. According to the Centre of Indian Trade Unions, which claims to represent six million workers, more than half the units in the garment and hosiery hub of Tirupur in Tamil Nadu are shut. Those that are open have been paying only a fifth of a worker’s wages.
In the tea-gardens of West Bengal and Assam, where wages are paid twice a month, there is no payment in the second fortnight. Near Delhi, half the factories in Bawana and Okhla are said to be shut.
There is, however, a flicker of hope elsewhere, starting with cars.
Thanks to the marriage season kicking in, there is a perk-up in sales. Cars and two-wheelers are popular gifts to the groom from the bride’s family. “People are paying the down payment by cheques or demand drafts, and the rest through loans,” said a Maruti Suzuki dealer in Delhi.
Mobiles get sticky
In contrast to cars, mobile phone sales have fallen further. “Sales are straight down by 50% to 60%,” said an industry leader, adding that the stakeholders were waiting for the government to intervene. The Indian Cellular Association has written to the government to allow the use of old notes but has not received a response.
Life without CoD
E-commerce companies are counting the blessing of a decline in cash on delivery (CoD), a costly and dodgy process. Otherwise, they have to contend with a decline of 15% to 20% in sales, according to consumer internet advisory firm RedSeer Consultancy. CoD is down to a fifth of total orders, from the three-fourths it was before the demonetisation move.
Not so fast-moving
Fast-moving consumer goods (FMCG) companies felt the heat as well. Dabur said that sales fell 30%. ITC admitted to an impact on demand but called it “temporary”. For the largest of them, Hindustan Unilever (HUL), the wholesale trade bore the brunt. Cosmetics maker Marico said the northern and eastern regions had been affected more.
On the back foot
Sales of footwear and branded apparel have fallen. Woodland reported a 25% drop last month. Research by rating agency ICRA said that textile retailers faced the immediate impact. The impact on apparel manufacturers is expected to be felt after a few weeks because orders will fall.
The real estate sector has seen a fall of 50% in enquiries in the low, middle and higher-middle segment. Home-buyers are waiting for more cuts in interest rates and a further fall in prices, said Samantak Das, chief economist and national director of research at Knight Frank India, a property consultancy. Realty websites have seen a dip of 15% to 20% in the number of people searching for properties.
The micro small and medium enterprises (MSME), where most transactions are in cash, have been hit the most. Sources said there could be huge job losses in this sector, which accounts for 20% of the country’s gross domestic product.
Not very hospitable
In hospitality, the food and beverage segment has taken a hit of 25% to 30%. Smaller hotels suffered the worst. “With the cash crunch, they have seen a huge fall in demand,” said an industry expert. Banquets, usually a money-spinner for hotels, have seen a 30% loss of business.