For large exporters, it was a ripple in the pond...

Amiti Sen New Delhi | Updated on January 27, 2018

...For small ones, it came as a tsunami that hit labour and raw material supply

Large exporters have put behind the effects of demonetisation, and the acute cash shortage that followed.

However, smaller ones, in labour-intensive sectors such as handicrafts and textiles, continue to feel the pinch.

“Realisation for exporters was not happening in cash anyway, so that was not affected by demonetisation. The only problem that exporters faced for a limited period was with vendors who took payment in cash,” said Anupam Shah, a Kolkata-based exporter of engineering goods.

Providers of services such as galvanising were accepting payments only in cash, as they were also buying raw materials in cash.

“This was an area where exporters faced problems. In a way, exports did get affected because if a vendor said he couldn’t provide services till he was paid in cash, it would certainly impact shipments,” Shah said, adding that the problem existed only for a few months.

Temporary glitch

On the same page with Shah is Rafeeque Ahmed, Chairman of Farida Group, a Chennai-based leather exporter.

“We faced problems only in the 2-3 months that the new currency notes were not available. Everything got frozen at that time. However, once the new currency started flowing in, the problem was over,” he recalls.

Most suppliers, he says, were paid in cheque or through bank transfers. The main problem his company faced was paying for raw material in the cattle market, where only cash was accepted.

Things, however, are more complicated for the small exporters in labour-intensive sectors, where most of the transactions happen in cash.

“Although the cash-crunch is not acute any more, the impact is continuing because it is like a process. Our business is down 30 per cent compared with last year,” says Arshad Mir, a Delhi-based exporter of handicrafts.

Demonetisation, he adds, resulted in the sector losing not just business, but also labour, who left the city when cash payments stopped.

Published on November 08, 2017

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