Demonetisation: Who Stands To Benefit And Who Loses Out Due To The Discontinuation of Rs 500 and Rs 1000 Notes

Ever since the historic announcement was made by the government to demonetise notes of Rs 500 and Rs 1000, the nation has gone in to a frenzy. While money hoarders lost a few days of sleep, the educated, salaried and digital-savvy middle and upper-middle class got busy celebrating the move with social media forwards and memes. However, this difference in the consequences being felt by the demonetisation decision is not limited to individuals only. A number of business sectors have also felt vastly contrasting effects of the announcement that PM Modi made on the night of November 8, 2016.

So, here’s a look at which sections of the economy will be positively affected by this big change and which ones will have to face hardships in the coming weeks.

The Winners

Mobile Wallets

With a severe crunch in liquid money and banking services that are a relatively slower; e-wallets are winning the game with their instant transactions and e-payments. We have already seen e-wallets being adopted by a range of service providers from rickshaw-walas to peanut vendors. Paytm has been on a roll since the decision was announced. It has registered around 700 per cent increase in overall traffic and 1,000 per cent growth in the amount of money added to the Paytm account over the last three to four days. The number of transactions per user has also gone up from 3 transactions to over 18 transactions in a week.

For all those who are new to the e-wallet game, here’s a Wallet Encyclopedia with all information about transaction limits, charges, and various other terms and conditions of all Indian e-wallets in one place.

Big Retail Chains

Since ready cash is going to be more precious in the coming weeks, Instead of going to local kirana stores for daily necessities, more people are likely to adopt shopping at big retail chains like Big Bazaar, Reliance Fresh, D-Mart etc., where payments can be done via cards, coupons as well as e-wallets.

Car Rentals

While the domestic flight ticket sales might have dropped by 10%; car rental services like Uber and Ola are likely to see a spike in customers. Cash is not just hard-earned nowadays but also hard-withdrawn. So, those who spend a fair bit of money, on commuting by taxis or rickshaws everyday, may want to save the cash and opt for an alternative that accepts virtual payments.

Gold Jewellery

The Gold Jewellery market has taken a hit since 8 November, 2016 because most customers buy gold with cash rather than cards. However, most industry veterans and experts are of the opinion that it will be beneficial in the long term. This sudden decision by the government will increase people’s faith in precious metal rather than liquid cash in future.

The Losers

SME and Retail

The small to medium scale businesses, retail shops, restaurants etc are the worst hit with majority of business transactions done in cash. This is likely to continue for a few months because cash crunch will reduce demand with people focusing more on daily/ basic necessities only.

Daily/ Weekly Wage Earners

With a strict cap on money withdrawals, city industrialists and manufacturers are facing problems in paying salaries to their labourers and workers in cash. Also, at the time when the decision was announced, around 86% of the cash in circulation in India was in the Rs 500 and Rs 1000 denomination notes. This means that even the daily wage earners had most of their cash in these high denomination notes. As this population lives hand-to-mouth, taking time off from work to get their money exchanged, means a great loss for these workers.

Additionally, with domestic and industrial constructions being halted temporarily, on other hand, many labourers are having difficulty in finding work.

Agriculture

The agrarian community mainly functions on cash and the harvest season is currently underway. So on one hand there are farmers, who recently sold their harvests and are left with demonetised currency; on the other hand, there are farmers, who have acres of crops still to be harvested, but they are unable to find labourers willing to work in their fields in absence of ready cash payments.

Also, while the PM has asked for 50 days of people’s time, the next 15 to 20 days are crucial to sowing Rabi crop. With no cash to buy seeds, fertilisers, and diesel; farmers will have to start sowing late, which can adversely affect the yield.

The current trend indicates that people in lower income groups like labourers, household maids, small vendors etc. are facing a great deal of hardship. Although it is being pegged as a short term problem, is it fair to justify a poor man losing a few days of bread as mere inconvenience?