The good and the bad side of demonetization

Today is 8th December 2016 and we have completed 1 month of demonetization after-effects. It has been the most fortunate and unfortunate decision for many , whereas one section of the society tends to be optimistic and sees it as a positive move, another section seems to be perturbed and disturbed because of this sudden ban on Rs 500 and Rs 1000 notes. When I talk about the supporters and non-supporters, trust me I don't include our great politicians, I am talking about common man, people who have recently started off their business or those who are just at a very nascent stage.

The prime reason for bringing in their point of view is because they are the new and the most powerful contributor to our GDP, furthermore, they are employment generator and hence, it's very important to understand what exactly our startups feel about demonetization. But before heading further, let me discuss few stats with you; the SMEs and Medium sized enterprises contributes to 8% of the GDP and they employ around 80 million people.

The after-effects or after-shocks of demonetization

As mentioned above that demonetization has brought in its own sets of benefits and drawbacks, when. We talk about our entrepreneurs then post demonetization time has led to the slowdown in receivables and transaction flow. The result has been derived after studying the viewpoints of around 30,000 entrepreneurs

As per the survey of LocalCircles citizen engagement platform, around 28% of start-ups are feeling the heat while 33% experienced no impact at all. So we have the division of opinion on this.

Another data that surfaced during the survey showed that 34% of the startups saw reduction in the transaction flow while 21% didn't feel any difference; at the same time 13% saw increase in transaction flow while 33% did not have customer transaction in their business .

Demonetization has got mixed reviews, well it's not all bad , there are companies that have gained a huge chunk of money post demonetization; companies like PayTM have seen multiple folds . Many companies are trying to convert this obstacle in opportunity, Ola, Freshtohome , Scootsy have come up with the option of pay later option which allows its customer to make payment later .

The root cause of problem

If we look after the prime reason of cash crunch in the nation, it is the lop-sided distribution of the banks and ATMs. On one side when in metros or tier II and Tier I cities where people have the facility of e-gallery, online payment, banks and ATMs at every nook and cranny , we have villages and tier III cities where people are fighting a battle to get money for survival, under such circumstances it has become difficult for small vendors to get money and pay their workmen their daily wages.

Let me share another statistics, as per the reports of RBI (December 2015) the semi-urban and rural area serves 12863 people while the urban branch caters 5351 people. The conditions of ATMs distribution are no different and under such circumstances, it has become difficult for the SMEs and startups to manage their daily operational needs. Irrespective of what all we are witnessing, still 86% of the startups feel that demonetization will surely turn beneficial in the long run.

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