Industries in unorganised sector to be worst-hit by demonetisation

New Delhi: The unorganised sector in India will be the worst hit by the November demonetisation of high value currency, while lots of industries in the organised sector would be impacted by the shortage of cash required to run business, a market analyst said on Monday.

"The unorganised sector is expected to bear higher brunt of demonetisation. Within the organised space, a lot of industries would get impacted owing to the sucking out of daily liquidity needed to run the business," Centrum Wealth Research said in a report.

"Within the organised space, sectors like NBFCs (non-banking finance companies), consumer, building materials, among others, would get most affected owing to high component of cash either in the sales-mix of the products or high cash usage in the distributor supply chain," it said.

"Urban, semi-urban and organised sectors could see revival much sooner as compared to the rural and unorganised part of the economy. The pain in the unorganised space could be more prolonged," it added.

Noting that the hit on the economy and its eventual recovery depends on the time taken to improve cash availability in the system, the report said it could take a couple of quarters for normalcy to return in "low ticket items in the consumption space".

In this connection, Centrum said results for the third quarter ending December have become irrelevant post-demonetisation.

"In the post-demonetised India, investors would be more focused on the subsequent quarterly (March 2017) season. Quarter four 2016-17 earnings season would be a real barometer of underlying economic recovery, as it would have the full quarter impact of demonetisation," it said.

On November 8, the government announced that Rs 1,000 and Rs 500 notes were no longer legal tender, saying the move was aimed against black money, counterfeit currency and terror financing.