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Demonetisation affects festive season sales

Monday, December 19, 2016
By Dominic Rebello

With the festive season of Christmas, New Year and harvest festivals soon approaching, retailers are witnessing fewer foot falls on account of demonetisation. With the government's move Rs. 500 and Rs. 1000 currency notes became illegal tender and forced people to deposit their money into banks. Though over a month has passed, the ques outside ATMs and bank's have not reduced much. The shortage of funds have affected the retail sector too.. with sales declining and affecting people moving out of their houses for shopping to the lowest levels.

According to experts, the shortage of funds will lead to a decrease of business in the range of 30% to 40%. The situation is likely to improve by February 2017 as the cash flow will improve and reach the consumers and banks.

"We have seen a nearly 30% decline in demand since demonetisation was announced, and it has come at a time when the wedding season shopping is at its peak," said Sanjay Behl, CEO, Raymond. "The liquidity has also shrunk, and more than 80% of this (textile) business is cash driven. However, I see the situation easing up in the beginning of next year," he added. Another major impact will be the Goods and Services Tax (GST) when it comes through, he added. “Demontisation has reduced our business by 40%. The high denomination currency note of Rs 2000, has lead to many problems. The scarcity of change has forced us to refuse customers. However, the people we are well acquainted with we offer credit, as we are aware of the problems,” said Ramesh Zaveri, owner of a mom and pop store in South Mumbai.

So would there be any recovery? The answer seems to be: Yes. According to Avinash Desai, owner of a super market in Kandivali, “Yes, we have lost business now but the digital push by the government, will help in the long run. People will soon be acquainted with the digital platform and that will transform the retail space. The problem of change will no longer occur and transferring funds will be a child's play,” he said.

“Demonetisation is a generations memorable experience and is going to be one of the economic events of our time. Its impact is felt by every Indian citizen. Demonetisation affects the economy through the liquidity side. It is a liquidity shock in which there is a sudden stop in terms of currency availability and people are facing cash crunch. Post demonetisation, the cards and mobile phones have emerged as the most widely available money transfer systems or payment mechanisms. As far as cards are concerned, we have seen a surge in the use of cards on the point of sales (POS) devices as also in e-commerce. Now a days, people are shifting towards digital transaction,” said Sandeep Ghosh, Business Head - Milk, Mother Dairy Fruit & Vegetable.

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