What Vehicle Sales Tell Us About Notebandi

The rural population definitely suffered a bit more than Urban. However, rural population were also very careful about spending in this 3 -4 months. Let us wait till April and match the data and it is likely that the people who delayed their spending may do it in April +. Till then, we need to wait. It is possible that the demand has been put on hold and moved to later months.

Dear MR.Vivek
Please understand that generally people do not buy vehicles during the fag end of the year for the
simple reason that the year of registration is an important aspect while the vehicle goes for resale later on.
This chart has no relationship to notebandi. Please analyse the trend in the previous years also and i strongly
presume that it would have been the same. True, notebandi created some side effects but let us give the government some more time and see the outcome. Ordinary citizens are not bothered about it any more and have moved on.

Dear Vivek. Pl do continue to write on the subject. it is very interesting even for a non economist , non financial guy like me. With due respect to my fellow reader - he can ignore the articles he does not find meaningful but for me it certainly is informative and impacts my thinking as well as my decision making.
Regards,
Ved

I disagree with your's as well Ambit hypothesis. to me Notebandi has nothing to do with drop in Sales 2 wheeler & 4 wheelers - may be some impact in 2 wheelers from class of people who don't have regular income 7 who save money as & when earned. There is no reason for not buying vehicles when easy financing options were available or when one has sufficient Bank balance is available. there was no restriction on cheque transactions.

I also remember one TV debate where Maruti Chairman made statement that Maruti had better sales in Dec 16 than in Dec15.

to me drop in vehicle sales reflects attitude of consumer & points to some underhand dealings in financing generating Black money

It will interesting to know how many vehicles are finance by Cash transaction.

That the "demonetisation"drive impacted the lower rungs of the Indian society is by now well established and understood by most of us. This the section of the society that does not have access to the various non-cash options such as Credit card, Netbanking, Mobile Wallets etc etc. Also, this is the section of the society that largely earns on daily / weekly basis and the amounts in question are small. In a scenario where even those who could afford to go cashless ended up hoarding cash being unsure of how things would pan out, the poorer sections were the hardest hit. It was evident when one went to the neighbourhood markets or spoke to auto drivers, vegetable vendors and others. Detailed "analysis" such as these may drive home the same point that most of us sub-consciously knew.

4424571259 I thought you as an organization is for long term instead of short term benefits. You have always maintained you are!

But on notebandhi your stance is completely opposite. Why do you take a stand like this? Drop in sales in one month is not going to bring the heavens down. Don't fall into the trap of linear thinking that once you have taken a stand you should keep up the same stand for times immemorial. The public at large has lost interest on this. Don't do the blunder of media that keep on and on in a role that they arrogate to themselves of informing the public. The public has heard both sides of the story and come to a conclusion. There is no point in beating a dead snake.

Vivek,

have been reading your articles over the last year or so.
Depressing to find a DISTINCT Bias over the last few articles .
Are you saying that Notebandi is Bad ?
No Corrupt Govt Official has been affected ?
No Politican has been affected ?
The data mining on the monies deposited in the banking system is all null and void ?
I reserve my comments.
Off late am getting to a view that reading your articles a waste of time as I am seeing a subtle push down of your thoughts with an agenda in place.

No wonder, the notorious agents have asked you to stop writing about demonetization, which is only one among the innumerous misdeeds. This is only the first step and many more steps will follow like letting loose ugly elements like Swamy and finally, if necessary, the elements of the various senas under their control. Even after 50 days, this govt. and RBI are not prepared to disclose the details of how much of demonetised money has comeback. Our great [anti] national media is maintaining deadly silence and the only hope, for honest citizens of this nation, is people like you. Crores of innocent, poor and honest citizens had been standing in queue for long hours for more than 50 days, most of the times in-vain. More than 170 innocent people have died, while standing in queue. As a mark of respect to those departed souls and crores of innocent citizens, please continue your Service to your MOTHERLAND.

your comments are spot on. here is another interesting side effect of notebandi - the increase in number of cheque bounce cases especially in tier III towns etc. i am sure if we can find some data, it will check this fact out. the problem is that post notebandi, most small businesses had no choice but to accept cheques and in many cases those bounced. people have 2 choices now - run after the buyer or go to court. another challenge in villages is that even today, there is hardly 1 branch for 3-5 villages and getting cash out is a problem despite limits going up. banks are still short of cash.

The author is right in his assessment of the adverse effect of Notebandi on the two-wheeler sales. Car sales were less affected. The Bajaj Auto MD, Mr Rajeev Bajaj, was outspoken in his criticism when he said that it was not the implementation alone, the very idea of Notebandi was wrong. The sales of two-wheeler came down by 15-20 percent in the last two months as against an expected rise of 8-10 percent registered during these months. FMCG is another sector affected by demonitisation. Several small and medium scale industries have been affected likewise- Tiruppur, Banares, Moradabad, Surat, Bhiwandi etc, for want of cash in the system. If one looks at the hard data, the reasons for the setback to the economy would be amply clear.

The currency in circulation in the last ten years has been around 12 percent of the GDP and has been growing at a rate of 15 percent p.a. It stood at Rs 17.9 trillion before Nov 8. It is common sense that, if 87 percent of it (Rs 15.4 tn) was invalidated overnight, thereby bringing the currency in circulation to just two percent of the GDP, the economy cannot function as before. The remonitisation has been a slow process; as on Feb 3 the currency in circulation was only Rs 10.5 tn. As this would include some old currency, the RBI is yet to release Rs 8 tn to the public in order to reach the pre Nov 8 level. In the last month, the addition of notes was below Rs 0.4 trillion per week, a point made by the author in his previous coloumn. Therefore, it would take another 20 weeks (end June) before the status quo ante was restored.

The govt, no doubt, would collect some additional tax from the unaccounted cash disclosed in the process replacing old notes with new. However, the process would be arduous and protracted and lead to corruption on the part of the tax collectors. Also there was no way of compensating those who lost wages, sales and profits due to Notebandi. It needs to be noted that even the tax evaded cash was contributing to the GDP by creating goods and services as well as employment.