Will Demonetisation Benefit The Indian Electronics Industry?

How will demonetisation impact the Indian electronics industry? Who will gain and who will lose in the long term? While looking for answers to these questions, the Electronics Bazaar team got some interesting insights

The demonetisation of the nation’s most widely circulated currency notes in November 2016 has triggered a chain of reactions, and the jury is out on how hard the Indian economy will be hit in the next two quarters, before getting back on track. Though this is not the first attempt at demonetisation, it seems to be an effective and well-planned one. A series of policy announcements over the last twelve months can now be viewed as important steps towards this transformational move.

Due to this demonetisation, money supply will reduce in the short term—at least till the new currency notes get widely circulated. Let’s try and understand the impact of this cash ban on the Indian electronics industry.

The immediate effects Topline impact

The biggest impact of the cash crunch is being observed in sectors that are driven by cash transactions. Slowdown in discretionary spending is hurting consumer durable sales. Sales of white goods—for example, televisions, refrigerators, washing machines, air conditioners—may slump as much as 70 per cent, as a large part of the market is driven by cash. This may continue for the next six months, till there is adequate circulation of new currency notes. Mobile phone purchase, too, will be affected.

According to market research firm IDC, this ongoing cash crisis is expected to pull down feature phone shipments sharply by 24.6 per cent and that of smartphones by 17.5 per cent during the quarter ending December 2016, compared to the previous three-month period. However, this fall is expected to be temporary, as shipments are likely to return to normal and channel inventory health will improve by the second half of the next quarter.