Currency Ban Makes Some Sectors Extremely Suffer, Full Details Here!

By klaireaustria

Dec 02, 2016 06:20 PM EST

The initial impact of demonetisation on economy, data coming in on Thursday showed a sharp drop in consumer purchases in November, with mobile phones, FMCG, home appliances, real estate, and cars bearing the brunt.

There is hope of a recovery once the cash crunch ebbs, but, for now, the news is grim. Sales of fast-moving consumer goods (FMCGs) - soap, detergent, toothpaste and cosmetics - were down 30% in November over the period last year.

A drop in car sales varying from 15% to 40% has been reported by dealers. Small towns, where mobile phone business was booming just a few weeks ago, have seen a 70% drop while 35% fewer phones were sold in cities.

Real estate reported a 50% fall in inquiries, 30% in resale prices, and 20% in searches online and air tickets sold 15% less in November, forcing carriers to cut average fares on the 11 busiest routes by 20% to 30%..

E-commerce usually sees a drop in November after the festival-season high of October but last month's fall - 25% to 30% -- over the previous month was unusually sharp. "Our orders dropped about 25%, primarily because of cash-on-delivery, which has been 70% of all orders," said TA Krishnan, CEO of Ecom Express, which moves packages.

The drops are so sharp that the economy, in the coming quarters, will struggle to match its April-September growth of 7.3%. That should not come as a surprise since more than three-fourths of the consumer payments in the country are in cash.

Factory data was no better. The Nikkei-Markit Purchasing Managers Index -- which tracks output, new orders, employment, and prices across key sectors - posted its sharpest fall in November since March 2013. Though factory output continued to grow, its pace of growth fell from 50.4 to 52.3 because of cash shortage.

On November 8, after Prime Minister Narendra Modi announced the ban on Rs 500 and Rs 1,000 notes, there was a frenzy to buy the costliest phone, the iPhone 7, making it one of the best weeks for Apple Inc in India. But overall mobile phone sales have taken a big hit.

"The stores in small towns rarely accept card payments," said Pankaj Mohindroo, who heads the Indian Cellular Association. In his estimate, mobile phone retail chains are doing barely half of their usual daily sales of Rs 350 crore to Rs 450 crore.

Car sales were no better. Maruti reported a sharp rise of 14.2% in November but these are vehicles sent to dealerships, which doesn't necessarily mean that all the cars were bought. Company insiders say retail is definitely down.

That may be an understatement. "Not even dogs are coming to piss into my showroom these days," said a car dealer in Jharkhand. A Maruti dealer said sales fell 15% in November, another dealer for the company said 35%, and a Hyundai dealer said 40%.

For tractor and SUV maker Mahindra and Mahindra, which has a large market in the small towns and villages, even wholesale numbers fell 24% in November.

Dabur India -- known for Hajmola, chyavanprash, juices, and toothpaste - saw a sales drop of 25% to 30%. Flour-to-soap company ITC, shoes and apparel maker Woodland, and cosmetics company Marico suffered a similar fate. The biggest consumer goods company, Hindustan Unilever Limited, says "the trade is down due to the liquidity squeeze".

Sales of home appliances were even worse. "In the first week [after the demonetisation], our business was down almost 80%. The impact has been more in smaller towns, where there are more cash transactions," said Kamal Nandi, executive vice-president with Godrej Appliances.

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