Demon of Demonetisation & Digital Evolution

Demon of Demonetisation has struck many in the past one week, especially those who played dubious games with the system. In order to set these people right, billions of commoners have also been affected. Here is a snapshot of the impact

Impact on Loans & Deposits

Interest rates on deposits have started to fall as the total deposits in banking system reached 100 lakh crores as of 17th Nov 2016. This is also a good news for those, who want to take loans as the interest rates on loan will see a downward trend very soon.

Impact on E-commerce

Cash on delivery (COD) is an option given by websites like Flipkart, Amazon, Snapdeal, ShopClues and Paytm etc while placing an order for a product. Close to 60% of all e-commerce orders are paid through cash on delivery, according to stats. Due to shortage of cash, deliveries that are being made to customers are being turned down and even cancelled. COD helps in easing the cash flow as it ensures a steady income for logistics companies, who charge for their services.

To counter this, the e-commerce companies are incentivizing customers to make pre paid orders. Other alternative that these companies are encouraging customers to use is payment gateways to pay for their orders like Ekart for Flipkart and ATS for Amazon India. This is apart from conventional payment options like using debit card, credit card and net banking

Impact on Branded Salons & Wellness Providers

Some branded salons are incentivizing customers for premium services by paying half for it. They are also accepting notes of Rs 500 and Rs 1,000. Jawed Habib’s and Head Turners are accepting cash deposit of Rs 25000 for membership while giving services worth Rs 50000 to ensure a steady demand for their services. Meanwhile there has been 20% increase in demand for services like hair smoothening, straightening and highlighting, as reported. Some salons hare also accepting notes of Rs 500 and Rs 1,000 if customer is buying their products.

Impact on Multiplexes & Small Screen Theaters

Demonetisation also made entertainment inaccessible for a few days. Multiplexes sell 40-60% of their tickets online or by card. To incentivize customers to book online or on mobile app, PVR has waived off the convenience fee for total of 4 weeks. 35% discount has been given on Food & Beverage combos & 20% off on first transaction on mobile app.

Meanwhile small screen owners in tier III & tier IV cities are facing brunt of cash crunch as they are not associated with any online payment gateway partner. They faced less than 10% of the occupancy in the first two days of demonetisation announcement. Very soon they will have to acquire the infrastructure to accept cards or sell tickets online for smooth running of their business.

Impact on Kiranawala/ Paanwala

Kiranawala and paanwalas are looking for digital solutions in times of cash crunch. These merchants have been frantically placing requests to get an installation made for new POS (Point of sale) terminals. According to Lokhvir Kapoor, CEO of pine labs, who manufactures these terminals, thousand requests have already been made for the installation of new terminus. According to Manish Patel, founder of mSwipe, there has been a rise in demand for mobile POS terminals, which can be attached to mobile phones and used to swipe cards.

Impact on Construction Workers Domestic Helpers

The Modi government claims that the Jan Dhan Yojana that they started out in 2014 covers 99% households. Banks have opened 25.45 crore accounts under the scheme that provides banking facility to all.

Domestic helpers and workers, who are usually at the lower wrung of the society, are mostly poorly paid and have to exert for physical labour often for long hours. Demonetisation brings bad news to these workers if they have been ignorant about their rights.

Impact on Real Estate & Stock Prices

Black money has been the prevailing norm in the real estate sector. Demonetisation could mean stalling of few projects leading also to cancellation of few projects. This could have an impact on demand for cement, building material & paints, thereby also affecting their stock prices.

Impact on Demand for Gold

Gold prices went down post the announcement of demonetization. The gold prices have fallen 1% and are likely to fall further 3% by next month. Gold imports are likely to drop 35% in the next few months. Buying will be slow till march as consumers will wait for the price of gold to go down further.

Impact on Truckers/ Farmers & Laborers

Traders are unable to make payments, due to which vegetable market are suffering. The supply chain was brought to a halt. A trader from Ghazipur mandi said that onion supply was stopped from the state. In Gujarat, cotton and groundnut mandis were closed. The demand has fallen due to lower purchasing power.

Meanwhile amidst all the confusion, Modi has requested its citizens to side by him till Dec 30th in his fight against black money and terrorism.

Impact on Tourism

International tourists, students, medical tourists, delegates and diplomats have been affected. Embassies are suggesting for a separate counter at banks to facilitate their needs for Indian currency also since locals are being preferred in banks to be helped first. Tourists are finding themselves to be stranded in far flung areas with banned notes. Medical tourists from Iran and Sudan cannot make payments from credit card due to sanctions. Meanwhile embassies have cancelled visits by delegates to India while this problem of cash crunch gets solved.

Ola! you got credit to pay later. Paytm me, Uber

Ola, a point to point taxi service has created an option for frequent users and corporate clients to repay through Ola Money e-wallet – payment option in the app even after 1 week. Meanwhile Ola’s contemporary Uber allows payment through paytm payment gateway.

Digital Solutions

Discontinuing Rs 500 & Rs 1000 note on Nov 8th 2016 by Prime Minister Narendra Modi has led many to look for digital solutions for payments. The beneficiaries include payment gateways like Paytm, MobiKwik, Payzapp, Freecharge that are being looked into as a desperate measure in desperate times.

Demonetisation Hacks

Here are a few hacks to counter the affect of demonetisation.

  • Every individual has 2.5 lakh tax free income that can be put in banks. Homemakers are most to benefit.
  • Gifts from Relatives can be tax free upto a certain limit
  • Weddings/ Ceremonies: Cash received in ceremonies and weddings are tax exempt to a believable limit.
  • Loans to staff/ Vendors: To save money in another’s bank account, they could be given a loan with a commission.


“In the short term consumers will be constricted by the unavailability of cash and that will trickle down through the consumer network and that will have some impact on their performance. Whether it is for months or for quarters is hard to say. A lot will depend on how the financial institutions and the government continue to respond through this constraint. But without any doubt, they will see impact on their results.”

Jack Ringquist, global leader for consumer products at Deloitte