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5 Sectors That Will Feel The Pinch of INR 500/1000 Tender Ban

5 Sectors That Will Feel The Pinch of INR 500/1000 Tender Ban
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India has been a cash economy since times immemorial. For women in India saving money from their household expenses and then putting on to buy small chunks of jewellery or their first car has been a way of life. To bring this hard earned savings into open and pour into bank accounts could have a severe effect on the consumerism of some of these sectors in India. It could mean a drain amounting to billions of dollars in the coming months in these 5 sectors, which will be able to see the impact of it sooner rather than later. 

Jewellery

The golden sheen in the jewellery sector in India would become paper thin in the coming months. When over 80% of transactions in buying jewellery are cash-based even with organised jewellery retailers like Titan, it could mean a big business setback in these festive months that start from Dussehera to go on till New Years. 

Real Estate

Second investment outside your home is buying a home. To lower tax liabilities, property sellers accept up to 30 percent of payments in cash.

Narendra Modi flagged this as one of the reasons for the demonetization of INR 500 and INR 1000. Modi believes the honesty of a buyer is compromised when property sellers seek a chunk of payment via cash. 

While this move could bring some level of transparency and clean up the realty sector, it may also lead to a surge in property prices denting demand.

Ecommerce

With 50% transactions still happening through Cash on Delivery , eCommerce which is already under pressure through cash burn for acquiring customers will further take a beating . There is no changing customer habits overnight to buy through credit card which would eventually reflect on the incoming for ecommerce sector. 

Retail Traders

Retailers traders would get affected to the last mile as their business still happens via cash. Big retails, who have adapted to debit and credit card payments, may not feel the pinch as much as smaller kirana stores that run accounts for regular buyers. Indian traders supply everyday bread and butter to majority of middle class Indians, who will now be pushed to use digital methods of payment.

Farmers

Farmers who have just set their crop in the market are flushed with funds and given the lack of knowledge and accounting systems in rural areas coupled with fear – it will create an enormous problem of farmers getting cheated by money exchangers who would charge them more to get their monies exchanged. The interest of those at the bottom of the food chain is paramount, and farmers getting duped could lead to serious repercussions for the country.

Edition: December 2016

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