Currency change: Impact on traders, entrepreneurs

New Currency Notes

The bold demonetisation move announced by PM Narendra Modi has evoked both praise and bittersweet reactions after its overnight implementation across the country.

Also Read: News you can use: PM Modi announces scrapping of Rs 500, Rs 1000 notes

While some are calling it a masterstroke to cleanse India from black money and fake currency notes, others are complaining of the issues they’re facing after the step taken by the PM on such short notice.



Also Read: Special Column by Smita Mishra: Check Mate for black money

In the large universe of retail and wholesale sector, there are around 600,000 wholesale units which are registered, which will now have to limit cash transactions, excluding the long queue of many commodities, agro-based and distribution traders who are unregistered. The whole trading cycle — beginning from manufacturing industry to wholesale and retail units — will suffer a delay in payments. According to data from ‘Ernst and Young’, since the retail and logistics industry is $900 billion in size, there can be staggering credit delay of at least $10 billion.

Impact on small traders to global market companies: Small traders will face difficulty for a couple of months until the proper circulation of new currency notes in the country. This will result in the downfall in the transaction size in the unorganised market of small traders to the global level Indian brands. In the whole trading cycle, the kirana store to major FMCG companies and logistics business will witness the delay in payments, which might largely impact cash flow in the country.

Worst-hit sectors: Although many sectors will suffer a two-month slowdown in cash flow due to scrapping of 500 and 1000 denomination notes, it could be particularly difficult for diamond, ceramic and real estate industries.

E-commerce lending support to PM’s decision: Many e-commerce companies are lending support to the PM’s decision though, like Sanjay Sethi, Co-founder and CEO, Shopclues, who has called this a masterstroke by the government and a bold move (as reported by Business Standard). Sandeep Aggarwal, founder and CEO of Droom has also voiced his support, as has the CEO of PayU India, Amrish Rao, among others