Even as the government is looking to mark November 8 as Anti-Black Money Day, the impact of the abrupt withdrawal of 86% of currency one year back has had a massive impact on manufacturing companies across the country, a new report published on Tuesday by the All India Manufacturers’ Organisation showed.
The report surveyed 10,000 respondents across the country, ranging from businesses such as trading corporations, exporters and manufacturers of varied sizes. These included large companies as well as micro, small and medium enterprises. It found that 45% of jobs in trading organisations were lost in the quarter October-December, 2016, that is in the first 52 days of the old Rs 500 and Rs 1,000 currency notes ceasing to be legal tender. During the same period, medium and small enterprises were also hit hard with 35% of jobs going away, while large companies saw 15% of their workforce shrink, the survey found. Exporters, meanwhile, saw one-fourth of jobs in the sector being lost post-demonetisation.
This continued for another quarter. During the period between January-March, 2017, job losses continued to occur and jobs reduced across various organisation sizes from 10% in exports to 30% in micro, small and medium enterprises.
However, some recovery seems to have happened since then in the quarter between April-June this year when micro, small and medium enterprises reported 15% increase in jobs, while traders reported 10% of jobs coming back. This was coupled with exporters and large companies reporting about 15% of their jobs returning.
Additionally, 78% of the surveyed companies felt that demonetisation was unnecessary or did not achieve any positive results, said KE Raghunathan, President, All India Manufacturers’ Organisation.
He added that job losses were also coupled with salary reductions for a lot of employees.
“There are a lot of people in the 40-50 age group who are now having to work at half the salary as compared to what they were getting before demonetisation,” he said. “Two kinds of people are looking for jobs – youth, which is not finding any opportunities and the middle-aged group, which has been laid off post demonetisation and GST.”
Demonetisation also had a considerable impact on the revenues of the companies. Right after demonetisation, traders lost 55% of their revenue in the quarter October-December, 2016 and this trend continued on to the next quarter when it reduced by 40%. During the quarter ended December last year, small and medium enterprises reported 35% dip in revenues, large companies reported a 20% dip while exporters stated that their revenues dipped by 25% in the aftermath of demonetisation.
While revenues mildly recovered during the quarter between April-June, 2017, they again started to dip during the most recent quarter between July-September, 2017 on account of the rollout of the goods and services tax. The GST, which subsumes all indirect taxes that businesses pay on their inputs, was launched on June 1. Since its launch, it has faced a lot of glitches and businesses have been disrupted.
In the quarter ended September 2017, revenues dipped for small and medium enterprises by as much as 30% according to the report and 15% for large companies and exporters. Revenues, however, continued to increase by 10% for traders in the same quarter.
The GST roll out also meant more job losses and the job-creation process, which started post demonetisation, has not been effective. In the July-September, 2017 quarter, jobs reduced by 18% for traders, 25% for small and medium enterprises, 15% for large companies and 20% for exporters, the report said.
The report ended with suggestions to the government, which included resolving the tax slab structure under the GST regime “urgently” and introducing special schemes to promote programmes like Make in India.
“While demonetisation led industry into the ICU [Intensive Care Unit], GST further put it into a coma,” said KE Raghunathan.