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:
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.
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.