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ANALYSIS

“Sales of 65% of cos have fallen post-demonetisation,” says PHD Chamber
Thursday, 09 November, 2017, 08 : 00 AM [IST]
Our Bureau, New Delhi
It has been observed that 65 per cent of the 214 firms across all the 10 sectors of the economy surveyed by PHD Research Bureau, the research arm of PHD Chamber of Commerce and Industry have registered a decline in their sales post-demonetisation. And owing to less purchasing power, the demand has not yet picked up fully in the economy.

The survey revealed that 61 per cent of the companies have reported a decline in turnover post-demonetisation due to low production and lower demand. These included micro-, small and medium enterprises (MSMEs) and large enterprises in the agro- and food processing and fast-moving consumer goods (FMCG) sectors operating in different states.

The survey, aimed at assessing the impact of demonetisation over the last one year, which, according to Anil Khaitan, president, PHD Chamber of Commerce and Industry, are still persisting.

“The reasons for this are the demand in the economy is still lacklustre and business firms are still not enthusiastic in the production process,” he added.

“Though the demonetisation of currency notes in the denominations of Rs 500 and Rs 1,000 has completed a year, the industries have still not recovered fully from the aftermath of unearthing 86 per cent of the total currency,” said Khaitan.

He added, “We appreciate the efforts of the government to stamp out black money from the system, restrict terror funding, curb corruption, integrate the informal economy into the formal economy and move towards a less cash society,” he added.

“However, the demonetisation drive has impacted the businesses directly or indirectly in terms of its impact on demand and sales. The impact of demonetisation is majorly seen on small businesses, as they are highly driven by cash transactions,” stated Khaitan.

Impact on select parameters post-demonetisation


Serial number

 

Status

1

Sales


2

Profit margins


3

Contractual employees


4

Full-time employees


5

Turnover


6

Cost of transaction


7

Digital transactions



(Source: PHD Research Bureau. Compiled from Survey of Industry)

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

Further, the impact of demonetisation has been more on the contractual workforce than the full-time employees, as the contractual (primarily daily-wage) workers have to be paid in cash. This impacted their employment in almost all the sectors surveyed.

Nonetheless, demonetisation had a positive impact on the use of digital transactions, as there has been a considerable increase (57 per cent) as consumers prefer digital payments over cash post-demonetisation.

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

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