Impact of note ban still hurting economy: Industry body

New Delhi: Even after one year, the negative impact of demonetisation continues to hurt the economy. The effects of demonetisation still persist as demand in the economy is still lacklustre and business firms are still not enthusiastic in the production process, said a survey by PHD Chamber of Commerce and Industry on Wednesday.

“Though demonetisation of Rs 500 and Rs 1,000 currency notes has completed one year today, the industries have still not recovered fully from the aftermath of demonetisation of 86 per cent of the total currency,” said Anil Khaitan, president, PHD Chamber of Commerce and Industry.

The chamber said that while it appreciates the efforts of the government to stamp out black money from the system, the demonetisation drive has impacted the businesses in terms of impact on demand and sales.

“The impact of demonetisation is majorly seen on small businesses as they are highly driven by cash transactions,” said Mr Khaitan.

PHD Research Bureau, the research arm of PHD Chamber, conducted a survey of 214 business firms covering 10 key sectors of the economy from MSMEs and large enterprises operating in different states to assess the impact of demonetisation in the last one year.

“It has been observed that 65 per cent of the firms across all the sectors surveyed have registered a decline in their sales post demonetisation. Also, owing to less purchasing power, demand has not yet picked up fully in the economy,” it said.

The survey revealed that 61 per cent of the business firms across all sectors have reported a decline in turnover post demonetisation due to low production and lower demand, said the chamber.

It said that majority of the respondents (56 per cent) have reported an increase in the transaction costs, particularly at the time of implementation of demonetisation, due to delays involved in payments.

“Further, the impact of note ban has been more on contractual workforce than full time employees as the contractual primarily daily wage workers have to be paid in cash which had impacted their employment in almost all sectors surveyed,” it said.

 However, the chamber said demonetisation had a positive impact on the use of digital transactions as there has been a considerable increase with consumers prefering digital payments over cash post demonetisation.

“Going ahead, it is essential to revive demand to give a boost to industry thereby refuelling the economic growth to higher trajectory in the coming times,” said Mr Khaitan.

“We look forward to revival of GDP growth in the coming quarters as anticipated at 6.7 per cent (real GVA) for the current financial year 2017-18 by the RBI in its latest fourth bi-monthly monetary policy statement 2017-18 released on October 4, 2017,” he added.

The key sectors surveyed include agro and food processing, auto components and automotive, construction and real estate, drugs and pharmaceuticals among others.