Demonetization: Impact over corporate sector!

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Demonitization

DENOMINATION OF CURRENCY NOTES

The day of 8th November 2016 came up giving shocking effects to the people of the country because of our honoree prime minister “Mr. Narendra Modi” ended his speech with denomination of Rs 500 and 1000 notes. They were not a legal tender thereupon. The same led to some positive and some negative effects. It impacted all the sectors of the country and the Corporate sector is one of it.

IMPACT ON CORPORATE SECTOR

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The corporate sector is a part of our economy. Corporate Sector is basically Companies. At first glance, a little has been seen on the financial results of the corporate sector. To our amaze, figures from the Centre for Monitoring Indian Economy showed some unexpected results. The non-financial sector showed an increase of whooping 21.5% in operating profits. Manufacturing sector showing 7.5% increase in sales was highest from June 2014. These numbers readily raise questions full of ambiguity.

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Looking towards a more nuanced picture, demonetization did hit the sales of the companies. It did have a huge impact on Consumer Electronics. The vehicle sector too faced a slowdown.

There were many businesses which emerged through demonetization. Mining, metal, and machinery witnessed an increase in operating profit. The primary reason behind it was a sharp contraction of profit in the previous year.

A Huge Amount of Profits

Profits due to Currency Notes Denomination
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Demonetisation also led to piling up of inventory of goods (Highest since March 2012). Finished goods, turned out to be a part of the profit. But, sustainability of those profits would depend on whether the finished goods are sold in the current quarter. An increase in the price of some goods also opened new avenues for the finished goods in inventory.

Considering all the highs and lows that came through due to demonetization. We can say that it was a saddened quarter for the whole country. Some sectors got the benefits, but they could not supersede the loss suffered by the rest of country’s population. But on a whole, Denomination of Rs 500 & 1000 notes is a big step in the betterment of our Indian economy.

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