Industry as a Whole Endorses Demonetisation Move, But Voices Concern Over Mounting Cash Crunch


<New Delhi, Delhi, India
The government’s demonetisation exercise has led to disruptions in daily cash flows, but the industry leaders cutting across the spectrum have given a thumbs up to Prime Minister Narendra Modi’s bold and innovative move aimed at eliminating black money and corruption. At the same time, they feel that the prevailing cash crunch situation demands immediate attention, at the end of the authorities concerned.
One of the badly affected industries post demonetisation is the real estate sector, which is witnessing considerable slump in sales and a general sentiment of low spending. However, the leading real estate developers feel that the demonetisation move will benefit all the stakeholders of the industry in the long run.

Elaborating on this point, Mr. Arjunpreet Singh Sahni, Executive Director, Solitairian Group said, “Demonetisation is a very bold move which will benefit the real estate sector by eliminating unscrupulous players from the market. Even though the prevailing cash crunch has caused inconvenience for now, the demand in primary market is expected to pick-up, for sure.” He added, “The biggest beneficiaries of demonetisation are going to be the end-users who will be driving the market from here onwards. Moreover, additional liquidity flowing into the banking system, post-demonetisation is expected to pull down the interest rates which will initiate the most favourable scenario for the industry in which consumers will be among the biggest beneficiaries.”

“Post-demonetisation, the huge amount of deposits in banks have turned the liquidity in banking system into surplus which may become instrumental in bringing down the home loan interest rates of almost all the leading banks and financial institutions. This coupled with improved transparency and increased confidence of homebuyers on the back of RERA will ultimately lead the sector to achieve sustainable growth,” said Mr. Pankaj Kumar Jain, Director, KW Group. He added that such positive scenario will ultimately lead to increased demand for real estate and the organised real estate players will be immensely benefitted for sure. “The expected softening of the home loan rates due to the excess liquidity in the banking system will attract more end-users to the market, as they mostly depend on financing from banks for buying their dream property. Moreover, enhanced confidence of end-users in the market will eventually attract global investors to the Indian real estate market,” said Mr. Manoj Kumar Singh, Chairman, Mangalya Group.

Mr. Bharat Aggarwal, Managing Director, Sheetal Group added, “Eradicating corruption and black money from the system, demonetisation will create an extremely positive environment for doing business. With online transactions becoming a new way of life, a considerable increase in growth across all the sectors of the economy will be achieved amidst a highly positive scenario.”

While deliberating over the impact of demonetisation on allied industries Mr. Ashish Baheti, Managing Director, Vectus Industries Limited said, “Smaller companies in allied industries are understandably very concerned right now because many of them depend on cash transactions and the emerging scenario will also lead to clean-up of unscrupulous players,” adding, “The organized players will have negligible impact of demonetization, with no threat to their overall strength and future growth. Thus, demonetization of big currency notes is going to be beneficial for the overall health of the industry.”

In the meanwhile, bucking the trend amid demonetisation in consumer durable industry, Mr. Nipun Singhal, Director, Lloyd Electric and Engineering Limited said, “We have no impact on company by demonetisation, while we understand the market is facing liquidity issues which may have resulted in lower sales, but as far as our company is concerned, we have posted 20% growth over November 2015 in November 2016. This may be due to our initiatives to offer aggressive and innovative finance options with zero down payments.”

Leaders of IT, Digital Printing, and Lighting industries, among others have also expressed that demonetisation may bring about long term benefits for the entire industry. Removing corruption and black money from the system, demonetisation will create an extremely positive environment for doing business. With online transactions becoming a new way of life, a considerable increase in growth across all the sectors of the economy will be achieved amidst a highly positive scenario. However, at the same time, Industry veterans have expressed their cautions optimism as well, as the prevailing cash crunch scenario may affect the overall industrial growth of the country.

Mr. Lalit Chaturvedi, General Manager, Kyocera Document Solutions India Pvt. Ltd. said, “Through demonetisation, India is gradually moving towards digital economy and hence digital India no longer seems to remain a distant dream to achieve. Obviously, in the long run demonetisation will positively impact the growth of the entire IT and Digital Printing industry, though practical difficulties on the liquidity front will remain challenging over the short and medium terms.” He added that complete digitisation will also open new avenues of business for the tech companies and the IT industry may expect considerable increase in their growth in just a couple of months.

“As spending has taken a major hit, the current phase is a bit challenging for the entire industry, including the lighting sector, however the organised segment of the industry is set to benefit the most with demonetisation. We expect minimum 10-12% increase in the current growth rate in our retail segment, as unscrupulous players manufacturing dubious quality products are set to be washed away from the market by the giant wave of demonetization,” said Mr. Rakesh Zutshi, Managing Director, Halonix Technologies Limited. However, at the same time, Zutshi added that had demonetisation exercise could have been implemented and handled in a better way the daily wage earners and labourers could have been saved from unnecessary suffering. “Of course, the demonetisation exercise should have been executed in a better way. However, with the expected decrease in lending rate due to excess liquidity in the banking system, microfinance sector is expected to witness huge growth opportunities in terms of volume growth. Moreover, tax rate may also come down and the GDP of the country will be enhanced by minimum by 1%,” added Mr. Yogendra Pal, Country Head at Ujala Credit Cooperative Society Limited.

Among various other industries, Handicraft export sector is also bearing the heat of demonetisation. Mr. Rajesh Kumar Jain, Vice Chairman, Export Promotion Council for Handicrafts (EPCH) said, “It is urgent to take necessary measures immediately, as more than 70 lakh people across the country are dependent on handicraft industry for their livelihood and almost all of them are suffering due to cash crunch situation. We have to procure wooden logs on daily basis for the production of handicrafts, but the traders accept only cash and due to the prevailing cash crunch situation, we are not able to pay them and hence the industry is witnessing a sharp decline in business.” Sharing similar concerns, Mr. Goldy Nagdev, Managing Director, Hari Darshan Sevashram Pvt. Ltd added, “As being one of the prominent manufactures of spirituality elevating products in the industry we have to procure raw materials from among the most choicest and quality ingredients from across the country, but due to severe cash crunch situation, we are facing various challenges in meeting our daily production requirements.”

Terming demonetisation as a major change in the mindset of unorganised players, Mr. Rajesh Gupta, Director, Okaya Power Pvt. Limited concluded, “Apart from striking a blow to the illegal trade, demonetisation is meant to promote cashless economy which will ultimately change the mindset of the people. With this brilliant move the entire industrial scenario will be immensely benefitted. Particularly in the power tubular battery segment, speedy growth is expected to continue uninterrupted.”