Impact of Indian Demonetization on Handset Market

On Nov 8th 2016 India’s Prime Minister Mr. Narendra Modi announced that INR 500 and INR 1,000 notes – that make up 86% of cash in circulation – could no longer be used as legal tender to buy goods and services. India’s central bank would start issuing new notes of INR 500 and INR 2,000 starting 10 November. A grace period to the end of December 2016 allows citizens to exchange the now illegitimate notes for new money, provided they can account for the source of substantial amounts. The decision surprised everyone in the country especially when it was announced in late evening and effective mid-night that day within four hours almost 86% of the currency remains no longer legal. Although the planning for such a country level move impacting 1.3 Billion people has been done for the past ten months but the government managed to keep it under the wraps until the time of announcement

How Demonetization has impacted the market?

While the initiative has its impact on various segments , Counterpoint Research outlines the impact on handset market during the month of November through survey run across retail chains across the country.

Key Highlights of the Survey below :

  • November saw a sharp sequential decline in sales. However, there were several reasons behind this – of which demonetization was just one
  • Diwali festival sales (mostly October and first week November) were reasonably strong, so November’s sequential decline was expected and in line with seasonal norms. We saw a similar decline in 2015 (17%)

  • A survey Counterpoint conducted with retailers across the nation highlighted that over 90% of retailers reported that demonetization had negatively impacted their business. However over 85% expected that the situation would normalize quickly.
  • Further the impact was largely seen in sub $150 segment which is contributing to almost 3/5th of total smartphone sales in the country

 

To summarize, the impacts of demonetization have disproportionately impacted lower cost devices where Indian brands are more prevalent; Chinese brands that play in the higher price bands are much less or unimpacted.The migration to digital payment systems has been accelerated by demonetization that will have long term positive impacts to India

To access full copy of report please visit www.counterpointinsights.com or send us an email : [email protected]