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Indian sales fall as demonetisation effects hit SMEs

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Staff Writer | February 27, 2017
The Indian Sales Managers Index (SMI) for February, shows the after effects of the December demonetisation policy which was intended to crack down on corruption and "black money."
Indian companies
Business in India   The currency situation
The February Headline SMI has fallen to an index level of 60.2 in unadjusted terms, the lowest level in over 3 years, World Economics reports.

Managers are reporting a big drop in monthly sales for both the consumer and industrial sectors, with small to medium size businesses that predominantly deal with cash transactions, being hardest hit.

Furthermore, the cash policy has had the effect of forcing up the overall Prices Charged Index (53.6) to levels not seen since spring 2013, when the Rupee was valued at ₹53.92 against the USD, it is now trading at ₹67.29. Some panel members are expecting the currency to continue to fall.

Higher inflation in the consumer goods and services sectors, represented by the Prices Charged Index for Services (54.7), is pushing the valuation of the Rupee to even greater levels of undervaluation on the World Price Index (WPI) scale.

The WPI under valuation level for the Indian Rupee is currently -41% using February data.

Businesses are taking advantage of the situation created by such an undervalued currency, with the majority of panel members feeling that the current FX level is becoming advantageous for their businesses.

Overall, February SMI data suggests an erratic situation for Indian businesses as they meet market challenges with considerably lower levels of confidence, slower monthly sales and higher prices caused by the currency situation, however the economy is still growing rapidly.


 

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