Demonetisation: 35 per cent job losses, 50 per cent revenue dip, says study by largest organisation of manufacturers

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The study stated that almost all industrial activities have come to a standstill, with the Small and Medium-sized Enterprises (SMEs) sector worst-hit. “While AIMO understands certain immediate repercussions of such a bold step (demonetisation) by the government, it did not anticipate or was prepared for such a jolt to industries even after one month,” said the study.

This was the third such study conducted by the AIMO on the impact of demonetisation and was circulated among members last month. A fourth study is expected soon.

Among the major findings of the study are:

# Medium and large scale industries engaged in infrastructure projects, such as big-ticket road construction, reported a 35 per cent cut in employment and 45 per cent revenue loss. The number of jobs and revenue are expected to dip by 40 per cent by March.

# Medium and large scale industries, including foreign companies, engaged in export-oriented activities reported 30 per cent job losses and 40 per cent revenue fall. This is likely to be 35 per cent and 45 per cent, respectively, by March.

# In the manufacturing sector, medium and large scale industries reported the least job-losses in the first 34 days (5%) and took a revenue hit of 20 per cent. This dip is likely to be 15 per cent for both by March.

According to the study, the factors that contributed to the impact are: zero cash inflow, rules curtailing cash withdrawals, staff absenteeism, a weaker rupee, choked fundraising options, inability of banks to work on proposals, derailed real estate sector, fear among foreigners, poor preparedness, and uncertain status of GST.

K E Raghunathan, national president, AIMO, said the studies were conducted by an expert committee set up by the organisation. He delined to provide details of the committee but said that it includes industrialists, SMEs and export sector experts, chartered accountants, consultants and lawyers.

Raghunathan said that AIMO had sent periodical reports about their findings to the Union commerce and finance ministries, on November 12, November 25 and December 12. “Unfortunately, there was no response of acknowledgement or reply from these ministries. Since the study is extremely critical of the Centre’s failed plan, we are unable to reveal the identity of the experts preparing these reports,” he said.

Referring to the government’s approach, Raghunathan said, “They turned a blind eye towards this emergency situation. They simply closed their ears, kept patting themselves or their bosses. Among all the states, Maharashtra and Tamil Nadu are the worst affected. The impact in these two states is still being ignored, thanks to an inefficient government in Tamil Nadu and a Maharashtra government that is bound to support the demonetisation drive,” he said.

The AIMO represents about 13,000 direct members and 3 lakh indirect members in India, including nearly 3,000 industries and associations in Maharashtra and 1,200 in Tamil Nadu.