Chennai: Digital India was the new watchword with the demonetisation move. Called a 'surgical strike' on black money, latest data from the Reserve Bank of India shows that the initiative found other targets too. Online payments in particular nose-dived as the economy slowed down.
Indians spent less with total transaction value of all payments going down 47% to Rs 94 lakh crore; and spent less frequently as evinced by number of transactions falling 58% to 67.15 crore.
RTGS transactions, which are high value transactions carried out more by business houses than individuals, saw a sharp dip of 20% to Rs 78.47 lakh crore in November 2016 from Rs 97.55 lakh crore in October 2016. The volume or number of transactions also dropped 12% to 79 lakh from 90 lakh earlier.
National Automated Clearing House (NACH) — useful for corporate and financial institutions that make payments in bulk like salaries, pensions and dividends — saw volumes down 10% to 15.25 transactions and handled lower amounts — value of transactions falling 21% to Rs 60,660 crore.
"Cash-crunch faced by households and small and medium enterprises (SMEs) has impacted both demand and supply," said JP Morgan in a research note.
The brokerage firm notes that the composite PMI declined by 7.8 points in November and December -- was the largest two-month decline since the 2008 financial crisis. "On the manufacturing side, both domestic and exports orders have declined meaningfully over the last two months; the large impact on export orders suggests some disruption to supply chains. The demand hit has meant that firms appear unable to pass on input price increases from firming oil and global commodity prices, manifested in some margin compression witnessed in the December manufacturing PMI," said JP Morgan.
People also drastically reduced their use of NEFT and IMPS post-demonetisation as consumer spending shrunk in November, when compared to the previous month. NEFT saw a dip of 7.5% both in volume of transactions and value. Number of transactions fell to 12.3 crore from 13.3 crore and value fell to Rs 880.7 crore in November compared to Rs 950.4 crore a month earlier.
Instant transfers on IMPS — a platform that works 24/7 unlike NEFT/RTGS that close on banking holidays and cleared in batches — also saw a decline. IMPS transactions fell 14.6% to 3.62 crore and in value terms by 6% to Rs 32,480 crore in November 2016, compared to October 2016.
Usage of PoS machines with debit and credit cards went up. But this in part could be explained by the heightened usage of cards at petrol pumps and might not necessarily signal an increase in consumer spending. People swiped their cards more frequently (volume up 45% to 20.5 crore) and purchased for higher values (amount up 64% to Rs 35,240 crore).
The much touted usage of mobile phones and e-wallets also didnot show the 'explosive increase' that was predicted. Mobile banking actually fell 7.4% month-on-month in terms of number of transactions to 7.23 crore. However, its value went up 10% to 1.24 lakh crore. So did people decide to do more business via cheques as cash got sucked out of the system? Well RBI data shows that cheques were written out for Rs 5.49 lakh crore in November 2016, 8% less than 5.97 lakh crore in the month of October.
Source: timesofindia.indiatimes.com