The mood in Delhi’s biggest retail markets is sombre.
It has been over a week since the Narendra Modi-led government announced a sudden move to withdraw currency notes of Rs500 and Rs1,000 denominations, which make up 86% of the money in circulation by value. Traders across the country’s markets are struggling.
In Delhi, sign boards welcoming plastic money and refusing old notes greet shoppers in markets visited by Quartz this week. Shopkeepers were seen idling away, discussing ways to secure cash and make payments. In the capital’s Old Delhi area, shops remained desolate at peak business hours. The mood was no different in upmarket areas and the cafes of Lutyens’ Delhi either.
India is a big cash economy (pdf). Its $600-billion retail market is hugely unorganised and dominated by small retailers, traders, and mom & pop stores. Thus, with less currency in circulation now, business has slumped between 50% and 80%, at least in Delhi, according to retailers and shopkeepers Quartz spoke to.
Traders are cutting back on orders and installing debit card machines. Yet, most said they were willing to go through the hardship to improve the economy.
Old Delhi’s Chandni Chowk area is one of the city’s oldest and largest markets where retailers and wholesale traders sell everything from cloth to spices, electronics, and scrap metal.
This historical market is a particularly popular destination for wedding shoppers looking to buy gold jewellery, apparel, and dress material. On a weekday, it is typically overcrowded. Over the last week, though, footfall has been abysmal.
Sales are down by at least 50% and some shopkeepers have even shut shop temporarily, said Sanjay Bhargava, general secretary, Chandni Chowk Sarv Vyapar Mandal, a cloth traders’ body in the market. According to Bhargava, nearly 90% of the transactions in the Chandni Chowk area are in cash.
“Look, there is a liquidity crunch in the market, no doubt and considering that this is a big cash market, there is no alternative other than to use (swipe) machines,” Bhargava said. He owns a clothing store and has had to cancel orders fearing weak demand.
Curiously, most retailers Quartz spoke to hailed the government’s move. “Things will improve for the better,” Bhargava said.
Another Chandni Chowk merchant, Daljeet Singh, has no complaints either. The owner of Baljeet Singh & Sons, an artificial jewelry shop, says his business was down on most days last week. “This is for the larger good of the country,” said Singh, who has rarely seen such a dip in business.
The government’s move, dubbed a “massive cleaning drive,” promises to fulfill its 2014 electoral promise of sweeping out black money from the country. It is also aimed at curbing the circulation of fake currency.
Not everyone is happy, though.
Karan Goel, owner of an Indian ethnic wear store, Tek Chand Arjit Goel, is in no mood to cheer. “We will be forced to let go of some of our daily wagers if the situation doesn’t improve. Customers are just not coming and we are struggling with day-to-day dealings in cash, such as paying off our sales staff,” he said haggling over a Rs1,000 discount with a customer.
Across the road from Singh’s empty shop, queues outside three banks continued to grow through the afternoon while the police patrol the area.
Not too far away from Old Delhi is Palika Bazaar, in the city’s central financial district of Connaught Place. Known for its small electronics and low-cost apparel sellers, this air-conditioned underground market is popular among young thrifty shoppers. But the mood has mellowed here.
At 4pm, Naresh Kumar, owner of Electronic Avenue, is sitting idle. Usually, he wouldn’t have a minute to spare. On a good day, his cash-counter would have registered Rs10,000-Rs12,000 by this time of the day. On Wednesday (Nov. 16), though, sales had touched a mere Rs2,000.
All one could see was few college students trying to squeeze out a bargain for mobile phone covers and a pair of jeans.
Kumar is struggling to collect fresh stock due to the cash shortage. “My distributors are refusing me. They want new currency and I cannot get it yet. It is all working on trust and credit,” he said. Like for many others, business has more than halved for Kumar.
A few meters away from Palika Bazaar, some foreign tourists and a handful of locals walk down the Janpath flea market. This is a sight that Yogesh Yadav, a salesman, is not used to. “We deal with Rs100, Rs200, and Rs500 denominations. But now people are not willing to let go of their Rs100 notes and we have no change for the Rs2,000s. Business is thanda (cold),” he said. On a regular evening, Yadav is busy haggling with young shoppers. Today, he is making small talk with fellow salesmen.
In other localities, retailers who don’t accept cards are finding alternatives. But that isn’t helping.
Ajay Nagpal, the owner of Sawan Fancy Centre, a wedding accessories store in south Delhi’s Lajpat Nagar market, is offering the option of using online wallet Paytm. Indeed, demonetisation has boosted digital payments in the country with many buyers paying online rather than using cash at points of sale or even on home deliveries.
However, that hasn’t helped the likes of Nagpal much. “Not too many people know about Paytm even now. Some 10% of walk-ins are okay with using the app,” he said. Business is down 70% since the government’s announcement. “We don’t know when things will improve,” a resentful Nagpal said.
Sales at electronics store Arvee Sales in the same locality have plummetted 80%. Owner Baldev Ahuja feels that while the government has given hope that a greater good will emerge, its execution has been poor.
Large retailers haven’t escaped the effect as consumers remain conservative about non-essential spending. A week into the ban, they have postponed or reduced spending on categories such as apparel, jewelry, and education, a survey by Innoviti Payment Solutions, which processes payments made at organised retail stores, estimated.
India’s upper-middle-class households are warming up to the idea of a cashless economy. Business has moved from cash to cards at least in the top metros of Delhi, Mumbai, and Bengaluru even as consumers are holding back on spending. Overall transactions by cards (both debit and credit) grew by 65% within days after the government demonetisation announcement, while transaction sizes dropped by 30%.
Yet, because the average number of card transactions (i.e payments made using credit or debit cards) per person in India is at 6.7, one of the world’s lowest, the markets are in the blue.
In Lutyens Delhi’s Khan Market locality, generally known for its well-heeled patrons such as expats and better-off Indians, the number of shoppers has dipped.
“We haven’t had a worse Monday than we did yesterday,” Dharmander Bidhuri, area manager at Harry’s Bar and Cafe, said on Tuesday. “It is slow, no doubt, people are spending less cash… the entire market is facing the heat,” Bidhuri, who usually sees an equal amount of transactions using cash and cards, said.
Even as retailers battle the gloom, traders are pinning their hopes that the government’s promise to purge black money will help in the long-run.
Chandni Chowk’s Bhargava is hopeful of change, noting that things will take time, “maybe by December end we will see some improvement.”
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