Effects of Demonetisation on wedding industry

    8th November 2016 wrote a new chapter in the history of Indian economics and the way we look at cash was changed forever. With just one unscheduled speech by the PM that evening, Demonetization of higher denomination notes of ‎₹500 and ‎₹100 brought the entire country to a grinding halt.

    The stock market plunged, businesses came to a standstill across the length and breadth of the country. Scholars and economists are thoroughly critical of the move. Admittedly, people have been gravely inconvenienced and compelled to take a frugal approach by avoiding unnecessary expenses. Everything that can be delayed, has been delayed.

    But what has seemed to be unavoidable, is the upcoming wedding season.

    Politicians from the opposition have raised the ‘wedding bogey’ to protect their votes and news editors have highlighted the negative impact of demonetization on the wedding industry and the wedding households. 

    Yes, demonetization has come as a jolt our way of doing transactions, but have we to look at the positive angles of this revolutionary move?  We’ll try to analyze the effect on demonetization through two perspectives:  

• General effects of Demonetization

1. There has been a 60% spike in cards payments post demonetization, with credit card transactions witnessing a 40% increase, and debit card transactions seeing a staggering 70% increase.
2. Payment wallets like PayTm, Freecharge, Mobikwik, etc. saw a massive ten-fold increase in transactions. Seeing such massive rise, banks have begun aggressively promoting their own mobile payment wallets. 
3. Card payments for flight bookings and other travel purchases increased by nearly 40%, as against the traditional bookings in cash through travel agencies. 
4. Surprisingly, card payments for liquor increased by 190%, entertainment like movies and theatre shows sales increased by 183%, sales in restaurants increased by 160%, followed by a 19% rise in purchases of apparel and 17% rise in jewellery purchases in urban centres. 
5. Bad loans written off earlier, have been recovered in certain cases through payments in old currency, like a bad loan in Lucknow was settled in one stroke payment of 3 crores, another bad loan of 50 lakhs was settled in Tamil Nadu. 
6. The government has been able to get huge amounts of cash back into the banking system. This liquidity will allow the government to plan better budgets and banks would reduce interest rates in the future with excess liquidity. 
   

• Effects of Demonetization on Weddings

    A lavish, no-expenses-spared wedding event can cost anywhere between ₹10 lakhs (approx. US$ 15,000) to ₹10 crores (approx. US$ 1,500,000). Going by the statistical trends, a person spends nearly 1/5th of his/her accumulated wealth on a wedding event, in India.

    But in the light of demonetization, how have weddings and the wedding industry changed for the better? Here are few of the change in practices.

1. Banks and NBFCs are pitching for ‘wedding loans’ to eligible customers, trying to relieve distressed families. 
2. Wedding households have been able to secure soft-loans or interest-free loans from extended families & friends. Earlier, these used to be cash loans that were off the books. 
3. While some families have opted for cheque and card payments, there are others who are trying to get rid of their ‘unaccounted wealth’ through cash payments to wedding vendors.
4. Core businesses like banquets, catering services and decorators, that used to earlier accept payments in a cash-cheque ratio have legitimized their transactions completely. 
5. Ancillary businesses like jewellery, clothing and apparel, which are organized have moved to card payments, where nearly 80% transactions were earlier in cash. Wedding professionals like make-up artists, photographers and choreographers have begun to accept payments through internet banking, cheques and mobile wallets. 
6. Even smaller vendors have begun accepting payments through cards or mobile wallets. 
7. Demonetization has changed the way, cash gifts are given at weddings. People are opting for innovative ways like transferring money to the bride and groom through mobile wallets or gifting online shopping vouchers. 
   

    The note-ban has, in a way, questioned the need for unreasonable expenditure. People are choosing a more practical approach with ‘modest weddings’ and focusing on financial planning for a secure future. There has been a drastic dip in dowry, as the traditionally the dowry was paid in cash or kind. Now paper trails have made the practice unpopular.

    The Indian wedding industry, valued at ₹1 lakh crores, and is rapidly growing at 35-30% every year, has received a knee jerk. The sudden shortage of liquidity due to demonetization has hit nearly 50-60% of the wedding industry and destination weddings have seen a sharp fall of nearly 90%. Nearly 3 lakh daily-wage jobs that are created during the season have been affected badly, as payments for almost all of these jobs are also paid in cash.  

    But not all is doomed. Demonetization has made people change their ways of spending and conducting business. With a greater push for ‘white transactions’, the government is encouraging businesses to come into the mainstream. In a bid to ease daily business activity, it has allowed businesses to withdraw from current accounts of businesses to ₹50,000 per week. It has also tried to lighten the burden on families that have wedding ceremonies planned, by allowing wedding households to withdraw 2.5 lakhs from the banks.

In the grand scheme of things, this may just be a minor hiccup that needs to be tolerated.