Note ban effects still lingering on: PHD chief

New Delhi: Even after one year the negative impact of demonetisation continues to hurt the economy. The effects of demonetisation are still persisting as demand in the economy is still lacklustre and business firms are still not enthusiastic in production process said a survey by PHD Chamber of Commerce and Industry on Wednesday.

“Though demonetisation of Rs 500 and Rs 1000 currency notes has completed one year today, the industries have still not recovered fully from the aftermath of demonetisation of 86 per cent of the total currency,” said  Anil Khaitan, president, PHD Chamber of Commerce and Industry.

The chamber said that while it appreciates the efforts of the government to stamp out stash from the system, demonetisation drive has impacted the businesses in terms of impact on demand and sales.

“The impact of demonetisation is majorly seen on small businesses as they are highly driven by cash transactions,” said Mr Khaitan.

PHD Research Bureau, the research arm of PHD Chamber conducted a survey of 214 business firms covering 10 key sectors of the economy from MSMEs and large enterprises operating in different states to assess the impact of demonetisation in the last one year.

“It has been observed that 65 per cent of the firms across all the sectors surveyed have registered a decline in their sales post demonetisation. Also, owing to less purchasing power, demand has not yet picked up fully in the economy,” it said.

The survey revealed that 61 per cent of the business firms across all sectors have reported a decline in turnover post demonetisation due to low production and lower demand, said the chamber.

It said that majority of the respondents (56 percent) have reported an increase in the transaction costs particularly at the time of implementation of demonetisation due to delays involved in payments.

“Further, the impact of demonetisation has been more on contractual workforce than full time employees as the contractual primarily daily wage workers have to be paid in cash which had impacted their employment in almost all sectors surveyed,” it said.

However, the chamber said demonetisation had a positive impact on the use of digital transactions as there has been a considerable increase with consumers prefering digital payments over cash post demonetisation. “Going ahead, it is essential to revive demand to give a boost to industry thereby refuelling the economic growth,” he said.