While the Centre is asking people to use digital payment services to move to a cashless economy, sales of mobile phones have plummeted in the last three weeks after the demonetisation drive began.

The Indian Cellular Association (ICA), which represents handset manufacturers, says the drop in sales has been significant. The industry feels the dip in sales could adversely impact efforts to encourage people to use mobile wallets and digital payment options.

Pankaj Mohindroo, National President of the ICA, said the drop has been in the range of 40-60 per cent in different markets. The impact has been more in rural areas and relatively less in urban areas. “The industry sells phones worth ₹9,000-12,000 crore a month. Of this, we estimate a drop of 40-60 per cent. Generally, sales happen in cash as margins are very low. In organised retail chains, the impact is minimal,” he said.

With representations from member companies coming in, the ICA has written to Finance Minister Arun Jaitely, explaining the situation. The mobile handset makers want the government to allow people to buy phones using the old notes just as it allowed people to pay for telecom talk-time top-ups.

“There is no scope for misuse. It is traceable because every phone has an IMEI number,” he pointed out. “The industry is witnessing a drop of 30-40 per cent in sales in rural areas, while it is in the region of 10 per cent in urban areas after the Centre withdrew the notes,” Y Guru, Chairman and Managing Director of Celkon Mobiles, told BusinessLine .

Pankaj Rana, Business Head, Mobility Division of Panasonic India, said that the buying power of customers had taken a hit as the old bill exchange process in rural areas was still proceeding slowly.

“Smartphones too will be impacted with the plunging of the rupee and will have an impact on imports. However, we are carefully watching the market conditions will be deciding on whether to increase our prices or not,” he said.

Distributors’ view

Distributors and resellers have been significantly impacted by the demonetisation initiative. “We expect sales to go down in the range of 10-20 per cent this month,” said Suresh Pansari, Director of Rashi Peripherals, a leading IT distributor, based in Mumbai. Pansari added that sales will be more adversely impacted next month, by around 20-30 per cent.

Industry watchers expect that the majority of the sales slowdown will come from non-high-end mobile phones, notebooks, USB drives, Wi-Fi routers and other low-margin items. “We do not see a slowdown in high-end devices as well as corporate purchases,” added Pansari.

With inputs from Venkatesh Ganesh in Bengaluru

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