India's money shock: The enduring impact

With the close of the first quarter of 2017, it’s a good time to reflect on the bombshell that hit India in November with the overnight demonetisation of 500-rupee and 1,000-rupee currency notes. Much hue and cry, much inconvenience, lots of drama, the famous Indian jugaad (an innovative fix or work-around; bending the rules to solve a complex issue) to convert paper to the legal new tender, and large chunks of population supporting the move even amid the chaos at the banks. Alongside all this, of course, was the wiping out of 10 percent to 20 percent of the year’s advertising spends, overturning the business projections of every media and advertising agency in the country for 2016.

Enough and more has been said about the move in both Indian and global media, with multiple statistics and chatter about cashless adoption — e-wallets, e-grocery, e-food ordering, e-cabs, e-whatever — floating around everywhere. Viral images of local illiterate vegetable vendors accepting Paytm; topical advertising popping up around the issue; endless fodder for conversations: this was the end of last year for every Indian.

Cut to today and everything seems to be back to normal and hunky dory. Well, almost. Advertisers are back, advertising is all around us again, consumers are in malls and markets and we are all busy with our daily lives once more, trading the new legal tender notes and returning to our old cash transaction ways. So what has changed?  

Well, many things. Some ways of doing business have changed, I hope, forever. The local vegetable vendor still accepts Paytm when he doesn’t have change for my 2,000-rupee note; the grocery store is much happier to accept credit cards than before; the blow to terrorist and Naxalite funding streams and illicit trade will mean it will hopefully be some time before these can take root again. 

Consumers, meanwhile, have discovered the benefits of a ‘less-cash’ society. The background infrastructure supporting this will have long-term and far-reaching positive consequences in terms of more access to credit and ecommerce, which can only make the economy stronger and more vibrant. 

Amid all the business-as-usual veneer, short- and medium-term pain remains at many levels. The retiring bureaucrat who can’t sell his house to create a retirement kitty because market sentiment on property is down. The farmers who could not buy the right farm supplies, which could lead to contraction in the coming food supply season. The villagers who continue to suffer because their bank branch still does not have enough supply of the new legal tender in the relevant denomination. 

The astute marketer is watching all of these signs and more before taking the full headlong plunge back into spending at pre-demonetisation levels. It’s about ‘watch and wait’ in practice, while ‘all fine’ in voice. And that to me is the reality of today: we are remonetised, but we are still not fully monetised. I will watch for a few more months to see the real impact in an economy as complex as India.

Jyoti Bansal is MD of PHD India.