DeMo caused an estimated Rs 8,000 crore loss to PV and tractor makers

The extent of the adverse impact of the government’s demonetisation exercise is now known. As per a PTI report, the Indian automobile and tractor sectors suffered an estimated revenue loss of Rs 8,000 crore in November and December 2016 due to demonetisation, according to Mahindra & Mahindra managing director Dr Pawan Goenka.

Following the smart uptick in sales in September and October ahead of the festive season in India, the ban on high-denomination currency notes of Rs 500 and Rs 1,000 hit auto sales hard.

"We have worked out by using some kind of formula that tractor and auto industry lost Rs 8,000 crore revenue in November and December," said Dr Goenka, explaining that the calculation as "what would have happened versus what has happened" based on growth rate up to October and "if that growth rate had continued in November and December."

"That’s a fairly straightforward calculation. It’s Rs 8,000 crore for the industry and about 10 percent loss of revenue," said Dr Goenka. In November 2016, vehicle sales across categories fell by 5.48 percent to 15,63,665 units, from 16,54,407 in November 2015. It was the steepest decline in 43 months when total sales had declined by 7.75 percent in March 2013. In December, monthly automobile sales growth in India hit a 16-year-low, with total vehicle sales falling sharply by 18.66 percent at 12,21,929 units compared to 15,02,314 in December 2015.

Demonetisation: a sales speedbreaker
Stating that the auto and tractor sectors were "in very high momentum" in September and October, Dr Goenka said: "The kind of sales we had in October, I have not seen in a long time." In September 2016, total sales of vehicles across categories grew by 20.16 percent to 22,60,992 units as against 18,81,643 units in the year-ago month. October 2016 saw growth of 8.14 percent to 22,01,571 units compared to 20,35,905 units in October 2015.

Dr Goenka said: "It (demonetisation) just stopped the momentum and then it takes time to build up because there is no rational reason why people do not buy now." He said at present there are "too many uncertainties" such as the upcoming GST and that "probably is having bigger psychological impact" on consumers. While the overall impact of demonetisation "was very deep in November and December", he said things have started improving in January and "I think by now we are almost done and I believe that by the end of March we will be through."