Trumping the right note

The past 48 hours have sent world politics and economics into a tizzy. The Modi government’s announcement of a ban on five hundred rupees and one thousand rupee notes and Donald Trump’s unforeseen US presidential victory sent shockwaves in India and across the world. The move was sudden but apt given the country’s festering black money problem.

The benefits of this move are two-fold, since it would not only circumvent the black money affliction but also result in greatly improved tax compliance. There is no discernible impact expected on the IT industry either.

Vimlesh Avlani, CEO, Graftronics, says, “This is a very bold move and a fantastic initiative by the Modi government. While it may lead to some discomfort for people who buy components on a cash only basis, credit and debit cards, online banking and NFC should resolve such problems by a great degree. Since most IT companies are not cash driven, such a move would have a negligible impact. I also think that the curb on black money may help re-direct revenues for start-ups and entrepreneurs which is going to be very good for India.”

This has allowed digital payment based organisations to cash in on the ban. Thus Paytm, Freecharge to Ola have seen a surge in business activities. In the long term, this may also prove to be a boon fort start-ups and bring down the overall level of inflation.

Even so, commoners were left in a state of disarray and many were surprised as well as bewildered by the sudden demonetisation. However, for most IT retailers this would prove to merely a temporary setback.

Anil Gupta, AVP - India Sales at eScan, observes,"What we feel is that the impact will be more at the retail sales level for products sold across the counters. As most of the last miles sales happen at SIS who service their captive customers by cash transaction for purchasing products for replacements such as HDD, Mouse, Key Board etc
may get affected temporarily as most of the time these people get credit. However, having said
that in the given scenario, IT retail market being closely noted, the SI partners may get few
days of credit from their regular distributors or sub distributors based on their relationship.
Hence, we do not see a major impact there."

Talking about the immediate impact on the IT business, Vipul Modi, Vice President, Sales and Marketing, Abacus Peripherals, “Since we are not a cash driven business, the move on curbing 500 rupee and 1000 rupee notes shall have little impact on the business. I would say the same thing for PC components sector in India as a whole. In fact, it is a positive move and may help the business indirectly in the long term.”

It is expected that most of this inconvenience shall be effectively resolved once the new Rs 500 and 2000 notes are brought into circulation by the end of the working week. For now, there is a slight impact on the IT supply chain.

“It may affect the demand for our products in the short term, However, it shall not have much of an impact in the overall context of IT business. Certain organisations may feel a tinge of discomfort. I think it may also provide a economic boost to the Indian market.” Highlights Rajiv Warrier, Managing director, AV Soft.

Perhaps this is a sign for India to increase the focus on digital transactions. Since UPI and ancillary systems shall foster a greater degree of transparency and do away with the problems associated with physical currency. The age of digital currency beckons.