Consumption hobbles back to normal post note ban

Mumbai : India’s consumption story, which took a severe hit from the government’s move to demonetise high-value currency notes a year ago, has returned to normal. Two quarters following demonetisation showed a slowdown in the fast moving consumer goods, automobile, cement and real estate space as severe cash shortage in the economy dealt a major blow to the consumption story.

  Even the organised players in cash-heavy consumption segments continued to struggle with subdued volumes for several months. Demonetisation slowed down the volume growth in the fast moving consumer goods sectors. In Oct-Dec last year and Jan-Mar, FMCG companies such as Hindustan Unilever Ltd, ITC Ltd, Godrej Consumer Products Ltd, Emami Ltd, and Dabur India Ltd reported up to 6% decline in volumes.

   The subdued trend in the automobile sales continued till January for Bajaj Auto Ltd and till February for Mahindra & Mahindra Ltd, while for Hero MotoCorp, the on-year decline in monthly sales extended till April.

  Top domestic cement companies–UltraTech Cement Ltd, ACC Ltd, Ambuja Cements Ltd–registered 1-9% on-year decline in volume in Oct-Dec. Real estate sector, which was used to high volume cash transactions, came to a grinding halt, with new sales and launches hitting multi-year lows. “Purchase of new property fell by up to 40% in major cities, while new project announcements fell by 11% after dem,” said Director Amit Wadhwani, Sai Estate Consultants.

Waning effect of disruption

• Demonetisation, which had slowed down the volume growth in the fast moving consumer goods sectors, is slowly losing its impact
• Automobile sales have seen an upward trend in recent months, indicating robust consumption growth
• Similarly, fast moving consumer goods and realty sectors are also seeing demand uptick