Demonetisation has negative impact on SMEs: Survey

Demonetisation has negative impact on SMEs: Survey

The note ban would have a positive impact on the inflation, the survey said.

The Dollar Business Bureau 

Demonetisation would leave a negative effect on the small and medium enterprises (SMEs), job creation and rural consumption in the short-term whereas the large and well-organised sectors stand to benefit in the long-term, according to a recent ASSOCHAM Bizcon Survey. 

The contrast in perception pointed out by the survey is quite stark. According to the survey, 81.5% of the participants felt that SMEs have been impacted and would still suffer the lingering impact for one more quarter. However, an equal number of respondents said that for big enterprises, the unprecedented measure of demonetisation impact would be positive. 

On the other hand, on a holistic level, majority of respondents felt that the effect could be seen in the declining sales volume during the previous quarter of the current fiscal year. 

Even decline in prices of vegetables and other crops is attributed to the incidents of distress sale in the wake of cash scarcity. About 92% of the respondents said that note ban would have a positive impact on the inflation, the survey found out. 

However, the survey said that demonetisation would lead to a better outlook in the long-term. More than 66% of the participants pointed towards negative impact on investment, linked to issues such as subdued consumer confidence and demand, mainly in the rural landscape.  

Commenting on the survey findings, DS Rawat, Secretary General, ASSOCHAM said, “When the economy is in a state of flux, it is quite a challenge to get the real picture on the ground.  Even though our survey does point towards some level of stress, the jury is still out and it would be quite a while before one can say with complete certainty whether or not the currency jerk was good or bad for the economy.” 

“For the present, the impact is seen on certain sectors, while others escaped. Hopefully, things would get normalised sooner than later with the Budget being seen as a big trigger,” he added. 

With regard to sector-wise impact of note ban, a majority of industry feels that agriculture, fertilisers, cement, textiles, real estate, automobile and retail will have negative impact whereas oil & gas, power, IT & electronics, pharmaceuticals and infrastructure will have positive impact.

The Dollar Business Bureau - Jan 21, 2017 12:00 IST