The currency ban has been badly affected the Small and Medium Enterprises! A recent report from the All India Manufacturers Organisation (AIMO) claims, note ban caused 35 per cent job losses and 50 percent dip in revenue with a worst-hit on the overall performance of SMEs. It has also projected worse impacts for a longer time than expected. The report also forecasts, till March 2017, a 60 per cent fall will be seen in employment part and 55 per cent loss will be recorded in revenue part till March 2017.
AIMO represents over three lakh MSMEs and large scale industries from manufacturing and export activities. So far, the organization has conducted three such studies on the impact of demonetization and circulated among it all member to educate them about the good and bad impacts of demonetization. The forth study from the AIMO is expected soon.
Awful Impacts of Demonetization
MSMEs and large scale industries related to construction and infrastructure development sectors are mostly affected with the decision of note ban. There has been a 45 per cent revenue loss in total with 35 per cent jobs drop. It claims that chances are that the theses industries revenue may take plunge to 40 per cent by the end of this financial year. On the other hand, the SMES which are in export and import business has seen 30 per cent to 40 per cent drop in revenue. This fall will remain same or may increase by March. However, the manufacturing sector has seen least job loss of five per cent but recorded 20 per cent dip in revenue part. The report forecasts, the dip is likely to be 15 per cent for both job loss and revenue by March.
Earlier to this report, other agencies also questioned the government about the good and bad impacts of demonetization and asked to show the full detail of all its impacts. According to a report conducted by the Economics Division of Credit Analysis &Research Limited (CARE), until the new notes are spread widely into circulation, lower transactions will occur in few industries in the short run. The industries related to agriculture, household, trading, retailing etc will be affected by the government’s announcement. The CARE Ratings mentioned that the announcement will also affect service sector including professionals like carpenter, doctors and all others.
In addition, the New York Times said that the Indian government’s estimate was based on the data available till October and that’s why it is little difficult to know about the real impact of note ban, as it was announced on 8th November.
Another agency, ICRA that provides investment information in India also observed a dip in MSME loan, tractor loan and micro loan pools in November 2016. It observed that;
- Micro loan pools declined to 91 per cent which were 99.8 per cent in September 2016.
- MSME loan pools record a sharp decline to 83 per cent which was 95 per cent in the previous month.
- Collections across tractor loan pools declined to 84 per cent from around 95 per cent in the month of September 2016.
Many other critics of this ban have said that the old currency ban has pulled down the economic actions and decreased the consumption of goods too. Many forecasters have even projected a slowdown in the GDP growth for next year.