The government’s recent demonetization move has definitely impacted the retail Industry in the short term due to lack of liquidity in the economy. As the Indian retail segment generates a lot of cash transactions, there might be reduction in the sales over the next 1-2 quarters.
However, the impact is felt more by the small traders and the unorganised retailing segment, rather than the organised retailers. Some sectors like jewellery and the luxury segment have been impacted more than others and will doubtlessly take much longer to revive. However, the use of plastic money and transactions through online payments will continue to release the money into the retail market.
In the medium-to-long run, domestic consumption will be stable owing to India’s strong economic base and favorable demographics. Also, as more retailers encourage alternative/digital payment solutions, the market ecosystem will become more transparent and structured going forward.
Demonetization has resulted in visibly reduced low footfalls in shopping malls, but this effect is temporarily and will turn around in few weeks as more currency circulates in the system and improves the purchasing power and appetite of the consumers. The long-term growth story of the Indian retail sector continues to be one of resilience and growth.
This article has been authored by Pankaj Renjhen, Managing Director – Retail Services, JLL India