How Demonetization is Affecting Small & Medium Enterprises

With the PM Modi’s surgical strike against the black money, the entire country is divided into two groups, one supporting this move vehemently while the other scrutinizing it endlessly.

With this move bringing a unique social current to the nation and everyone discussing and debating on the topic, there are a few sectors of our economy which could not escape the adverse aftermath of this latest revolution in India. The sector of micro, small & medium enterprises (MSMEs) is apparently one of them. 

The demonetization move is undoubtedly an intrepid move by the central government, but at the same time it is also a truism that the current result is huge chaos and cost for many. The heart of Indian economy i.e. the small and medium enterprises are experiencing extremely disappointing levels of business since the move came into effect.

 Considering that this sector accounts for 45% of the GDP and 80% of employment to the economy, a ban on cash liquidity can be catastrophic both in terms of growth and equity. With the cash transaction lowering in the short-run, SME is apparently facing a fall out, atleast tentatively. Given that 80-90% of the work culture in the small industries is based on cash, the entire business is utmost affected with trade going down tremendously and huge challenge to purchase raw materials which is the major source of business for this industry.

With the multitude of hopes on the long-term benefits of demonetization that is yet to come, it is expected that few more weeks are left before the situation stabilizes for MSMEs. Let’s hope the environment relaxes for SMEs a little with the implementation of GST as well. 

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