India’s Demonization Policies Derails a LED Retailer Operations

Indian Prime Minister Narendra Modi’s abrupt demonization policies launched on Nov. 8, 2016 and its ripple effect has left a dent for LED manufacturers relying heavily on cash transactions, reported The Hindu.

To fight corruption, black money, and illegal trade, Modi wiped out nearly 86% of the circulating currency on the market, causing panic throughout rural and urban India, wrote Asia Times.

A person holding a stack of 1,000 Indian Rupee notes. (Photo courtesy of Gopal Vijayaraghavan via Flickr)

The abrupt demonetization policy change was rolled out before the government printed the new currency, causing most ATMs to unable to distribute new currencies to public, added the report.

Lack of government preparation and the short notice caused widespread panic as Indians lined up in banks for hours to withdraw money or swap old bank notes for new ones.

The local LED industry has been affected by the sudden cash crunch, one Paharganj-based trader Abhijit Bose claimed buyers visiting retail stores plummeted 80% after the demonetization policies were rolled out, reported The Hindu.

Bose from Satyam Techno, a local company that manages wholesale and retail of LED lights and signages, said it has become difficult for him to sell existing products or stockup on new products.

"Cash transactions are crucial for product logistics, packaging and transportation, said Bose, adding it had become even difficult for him to pay employee salaries.

“A large chunk of the LED lighting business is dependent on the unorganised sector, which runs on cash transactions. While I am waiting to get cash payments due to me from dealers in other States, those involved in post-manufacture logistics of existing stock are refusing to accept payments in any other form than cash,” said Bose.

He also pointed out only two out of his 16 employees had a bank account that allowed him to transfer their monthly salary, most of his employees would need to rely on cash payments.

It has been difficult for the 49-year-old businessman to grab hold of Point of Sales (POS) machines from banks, due to the sudden demand surge.

According to Bose, India’s current cash crunch will have long lasting impact on the country’s economy that will take time to recover.

Bose would be lucky to break even this month.

“With the lack of demand, I believe I will only be able to break even this time and will likely continue to do so for the next six months,” said Bose. “In the meantime, I am waiting for a POS machine, for which I had applied a week ago.”

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