Indian Economy Collapses As 'Demonetization' Crushes Small Business

Tyler Durden's picture

The Sales Managers Index (SMI) is one of the earliest monthly indicators of Indian economic activity. February's data shows the catastrophic after-effects of the December demonetization policy which was intended to crack down on corruption and 'black money'.

The February Headline SMI has fallen to an index level of 60.2 in unadjusted terms, the lowest level in over 3 years.

Source: WorldEconomics.com

Managers are reporting a big drop in monthly sales for both the consumer and industrial sectors, with small to medium size businesses that predominantly deal with cash transactions, being hardest hit.

Source: WorldEconomics.com

Furthermore, the cash policy has had the effect of forcing up the overall Prices Charged Index (53.6) to levels not seen since spring 2013, when the Rupee was valued at ?53.92 against the USD, it is now trading at ?67.29. Some panel members are expecting the currency to continue to fall.

Source: WorldEconomics.com

Higher inflation in the consumer goods and services sectors, represented by the Prices Charged Index for Services (54.7), is pushing the valuation of the Rupee to even greater levels of undervaluation on the World Price Index (WPI) scale. The WPI under valuation level for the Indian Rupee is currently -41% using February data. Businesses are taking advantage of the situation created by such an undervalued currency, with the majority of panel members feeling that the current FX level is becoming advantageous for their businesses.

Overall, February SMI data suggests an erratic situation for Indian businesses as they meet market challenges with considerably lower levels of confidence, slower monthly sales and higher prices caused by the currency situation.

 

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Captain Chlamydia's picture

Welcome to digital currency only....coming to you too!

OCnStiggs's picture

CC is correct!

I have read the whole "India Experiment" has been staged by the Fed. Its an experiment to see what would happen here because they fully intend to do the same thing in this country. That way, when the banks crash, they can seize all the deposits or automatically issue "hair cuts" to all depositors. The FDIC CANNOT insure all the funds in all the banks.

Its just another desperate scheme to get all the chips before the house of cards tumbles. And, its wobbling more every day.

prime american's picture
prime american (not verified) OCnStiggs Mar 3, 2017 7:10 AM

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Michigander's picture

Dont give  this ass hole any clicks down. Big down clicks catches the eye and draws attention to this cock sucker. I hope the herpes boil on his tongue ruptures in his sleep and suffocates him.

bob_bichen's picture
bob_bichen (not verified) Michigander Mar 3, 2017 11:22 AM

ban SPAM!

COPY 'prime american's" SPAM and paste it into an email.  Put the following:  "SPAM!!  user: prime american"  in the reference line and send to   abuse@zerohedge.com

 

It will take you all of 24 seconds.  And it really does work. 

dark fiber's picture

Ok, which country has more guns and which country has serfdom ingrained so deeply in its culture it is actually part of their religion.  I don't think anyone is that stupid to try this in the US.

fattail's picture

The FDIC already does not insure all the funds in all the banks, now.  The insured limit is up to $250,000, anything above that is uninsured and depositors take a hair cut.  Remember the lines outside of IndyMac.  Those were uninsured depositors, but the limit then was $100,000.

What the FDIC did back then was to raise the insured limit from $100k to $250k and had certain money market accounts with unlimited coverage, which was to insure corporations making payroll on monday did not lose their uninsured payroll when their bank found themselves on the Friday list.

i suspect congress will raise the guarantee amount during the next financial crisis to insure there is not a run on the banks like they did the last time.

Find out how much of your money is insured.

https://www.fdic.gov/edie/

 

Dirtnapper's picture

Remember in Crominbus 2015 directed FDIC to cover outstanding derivatives before covering unsecured creditors (ie checking/savings depositors).   FDIC has about $26B on hand and can access $250B from Congress, how far will that go when the bank has trillions in derivatives in covering unsecured creditors (ie depositors)? 

Mustafa Kemal's picture

" have read the whole "India Experiment" has been staged by the Fed."

According to this

http://www.gunsandbutter.org

it is CIAs USAID in cooperation with the likes of Gates and Google.

Dame Ednas Possum's picture

The article I have refenced below is from back in November but it does an excellent job of describing exactly what is happening in India and why one of the primary goals is supression of gold demand/ price through the supression of the very large domestic retail market for physical in India. 

http://investmentresearchdynamics.com/the-deep-states-attempt-to-suppres...

I strongly encourage you to read it. 

Raffie's picture

The future is here and now if yuou like it or not.

beijing expat's picture

This would explain the news black out on this story.

Fake news outlets won't touch real news.

Putrid's picture
Putrid (not verified) Mar 3, 2017 5:34 AM

The New York banks are trying to magnet money back into the Dollar by any means; destroying economies and competing currencies is part of the PLAN. The BRICS are being targeted quite aggressively; historically, war is the most likely outcome but the NUKES are keeping the peace.

Now that the Rockefellar Network has lost the Oval Office; those factions that desire a peaceful resolution to this stand off may grasp their chance. 

Just make sure friends, that you've located yourself well. And if you're still active in "the market" you had better not be gambling with your own money. 

 

Good Luck,
Putrid
www.beforethecollapse.com/about 

Mustafa Kemal's picture

"The New York banks are trying to magnet money back into the Dollar by any means"

According to this

http://www.gunsandbutter.org

in addition to FATCA we have a consortium of reverse FATCA country setting up the US as the worlds largest money laundering country. One of the reasons for Panama leaks to bring all that back home.

They know they are losing the petrodollar and have a new game plan.

Putrid's picture

Just protect yourself Mustafa. This is not the time to gamble. The Rothschild Family has got their man in the Oval Office, control the U.K. and are quite influential in France. Recall that the UK supported China's Development Bank.

I'm in China, I can tell you this place is primed for the Reset.

If you're in the US you should think of leaving. Read volume 1, written by your top people, the USA is going to collapse.

Good Luck,
Putrid

Latitude25's picture

No media outlet wants to say it but you can be 100% sure that Indians are dumping fiat currencies for gold and silver.  They have many years of experience with worthless government fiat fraud and know how to protect themselves.

Putrid's picture
Putrid (not verified) Latitude25 Mar 3, 2017 5:45 AM

And that's evidence of how desperate the situation is; there are two global currencies--Dollar and Gold and I can't see the Dollar winning. I suspect there's serious leakage out of the Dollar which may force the FED to raise rates. If this is true, the FED has already lost control. 

My network inform me that "The FED chairs are terrified." 

I've gone all in; 100% Gold. 

Good Luck,
Putrid
www.beforethecollapse.com/about 

kidbroge's picture

Thanx for the link, a lot of new info for me, this will be a good read. Adios

Putrid's picture
Putrid (not verified) kidbroge Mar 3, 2017 6:59 AM

By all means write me for the third volume. We've modeled the System in it's Totality and are now focusing on the future. It's not looking so bright to be honest; but quite fascinating to think about. Also, it appears to have brought to light that it is illogical to remain invested in FIAT instruments. I'd send it to Tyler but such analysis is too indepth for an article.

 I've decamped to a topical beach beside Macau, as good a place as any to enjoy the End of World Party ;)

Love,
Putrid
haughian@hushmail.com
P.S. And that invitation to write is to all Hedgers, as they are writing vol 3. 

 

 

Another regional indian.'s picture

You must be a gold trader/seller. Gold traders always say people are dumping everything for gold, regardless of whether people are actually doing it or not.

I am an indian living in india. And people here everyday are still using cash transactions for everything. They are also saving money in cash, in addition to jewellery. Nobody completely dumps fiat currencies for gold/ silver. Not in india, and not anywhere as you cant buy anything directly using gold/silver. Nobody accepts gold as 'payment' for everyday items. Try going into a store and pay for items bought...using gold. Nobody will accept it.

Latitude25's picture

So after the fiasco of demonitization you're trying to tell me that Indians are so stupid that they would go right back to having faith in fiat again?  You're Indian.  Are you that stupid?

And when did indians start expecting to use gold for daily transactions instead of longterm savings?  I specifically refer to the stacks of old rupees hidden in mattresses and that WILL NOT be happening anymore except for you maybe since you're such a genius.

Another regional indian.'s picture

They have no choice but to have faith in fiat. Because fiat is compulsarily needed for daily spending but also for savings too. Sure they might not hoard wealth entirely in the form of cash as much as before, but they will still hoard it (this time in smaller denominations like 100). 

Latitude25's picture

LOL.  Fiat is compulsory for savings?  And the long term value of fiat stuffed in your mattress is what?  Are you delusional?

Another regional indian.'s picture

Yes in a conveniance point of view, it is compulsary. Yo ucant depend on gold alone as a saving means.  

peterk's picture

this is solid reason   CASH will never be BANNED.

In economic downturns or poor econoines like india CASH IS KING

GOv'ts print CASH MONEY in  economic downturns, only in BOOM TIMES IN RISH Countries

do they talk about  banning cash.

Thas why venezuale printed CASH and didnt issue the populace ith  credit card. THey could have easily

goven people  credit cards and issue digital money  on a daily basis  to all, but they didnt,,, WHY.. because CASH IS KING

Al this talk of banning cash is acedemic,  a theory  in which india was an experiment.. and its failed

Basically, politicians are too scared to go cashless, riots will erupt. Just like in japan

when KURODA went negative rates, pollies there complained as  neg rates they said was abad sign to the populace.

Cash will never be phase dout as its human nature for people to want physical things in hand. As simple as that

IF they wanted to  ho cashless it would have been done already.

 

Another regional indian.'s picture

'Cash' was not not banned in india. It is fake news. Only high denomination notes like 500 and 1000 ruppes were banned. And then govt again introduced 'cash' in the form of new 500 and 2000 rupee notes. 

Banning of cash means banning all notes not just high denomination ones and not introducing new notes in their place.

Dubaibanker's picture

Every single metric in India from IIP, money circulation, employment, inflation, agri production, FII losses, new investments etc ALL have plunged but the magical GDP number that is so widely manipuated worldwide is up 7%....HAHAHAHAHA HAHAHAHAHAHA

Just the car sector had a revenue loss of USD 1.2bn

Demonetization effect: Automobile, tractor sector suffered Rs 8,000 crore loss

 

Entire leather sector which is a major export sector of India has died

The Slow Death of Kanpur’s Leather Economy And UP’s Job Crisis

Demonetisation breaks the back of Maharashtra’s textile industry

 

Just in 1 state 300 odd farners committed suicide in the last 3 months, that's 100 a month!! In Last 3 Months, 287 Farmers Committed Suicide In Madhya Pradesh

then there is this:

 

I Don't Believe India's 7% GDP Growth Rate - Not With Demonetisation I Don't

 

 

the fact of India is that India is bankrupt.

Which is why this current Govt has hiked the poor man's and commerical user's main input by the highest price hike in history. 

LPG prices raised by Rs 86, steepest hike in India's history http://img.etimg.com/photo/17954381.cms); font-size: 12px; margin: 10px 0px; outline: 0px; padding: 5px 12px; vertical-align: baseline; font-family: Arial, Helvetica, sans-serif;">



Read more at:
http://economictimes.indiatimes.com/articleshow/57416002.cms?utm_source=facebook.com&utm_medium=referral&utm_campaign=ETFBMain&utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
Another regional indian.'s picture

All those have been affected due to demonitisation. Once cash becomes available as much as before....all those metrics will pick up. Already cash circulation has vastly improved.

A fall in growth for just a single month is not a 'collapse'. This site spins everything as a 'collapse' everyday. A collapse of an economy means a drastic fall in growth (not a small fall in growth ) in every sector for atleast a year, not a month.  And all those sectors you mentioned are growing every year (except the last quarter of last year when demonitisation came into effect). And once cash becomes fully available in a few months, all those sectors will pick up. Given that india doesnt have stuff like oil to export, it still is actually is doing better than it should.

Dubaibanker's picture

You obviously have a degree and a computer, so you won't understand what's happening in any of the articles I linked above....

Why don't you read the articles and see how many people are killing themselves...do you understand KILLING themselves......and why do you think that is?

Because everything is perfect??

Which poor country has so many suicides, can you name one besides India?

Do you know that 5 years ago, oil was at USD 80-90 level when petrol was sold at INR 70 and today oil is at USD 45-50 and still being sold at INR 70....

You don't even need a degree to understand that the Govt is lying and cheating to people!

No Sector is growing in India. Go look at exports, diamonds, real estate, banking (except random consumer companies like Patanjali or some car companies) over the 5 years and demonetization came as a death knell.....

If any economy in the world is growing, whether small or large, the first thing you see is a massive uptick in job creation. In India, the opposite is happening.

If, as you say, economy is growing and things are great why is unemployment rising and job creation is near ZERO?

According to the labour bureau data, India had added 419,000 jobs in 2013, 321,000 jobs in 2012, 929,000 jobs in

2011, 870,000 in 2010 and 1.28 million in 2009.

Job growth in 8 sectors at 7-year low: Govt data

 

Another regional indian.'s picture

Getting personal are we? 

People are killing themselves true...but people have always killed themselves in india (well atleast in the modern ear since record keeping existed). Why? Because poor people who cant feed themsleves have always existed in india. That doesnt mean the sectors are not growing. Year on year growth in every sector is there now (except propabaly manufacturing which didnt grow enough ffrom 04-14). And now even that is picking up (yearly stastics).

And every govt, lied and lies to people every where. Thats nothing new. Thinking that the economy is slowing because the govt is lying is absurd. Govt lies even when econ growth is good.

Real estate? It grew by a 100 percent in the last 20 years. Now that it has slowed down people are finally able to afford homes. And even this a temporary blip, when cash supply increases real estate sector will pick up too. Diamonds? pft, That forms a tiny sector of india's economy. Exports, banking will also pickup once cash flow imporves (it already improved a lot). 

The job creation statistics are only upto 2014. I will be interested to see the latest statistics . Old statistics dont tell the current story.

 

UmbilicalMosqueSweeper's picture

The toilet index shows tht India is in deep shit.

Another regional indian.'s picture

According to the toilet index, every country was, is and will be in deep shit forever. That is why that index is called the toilet index. Comprende? :)

Martel Habermann's picture

Every single metric in India from IIP, money circulation, employment, inflation, agri production, FII losses, new investments etc ALL have plunged but the magical GDP number that is so widely manipuated worldwide is up 7%....HAHAHAHAHA HAHAHAHAHAHA

These guys unilaterally cancelled their issued debt, making it a criminal offense for their residents to hold demonetised notes.

Indian media now regularly carries reports of ordinary people being arrested because they were found with old currency notes in their possession.

Do not expect much by way of integrity from this lot.  Their word clearly means nothing.

arby63's picture

Without cash, no economy will survive for long---well, not without an eventual civil war of some type. A cashless society may work in Sci Fi novels but we're not there yet. Not by a long shot.

Problem is, India is going to have a hard time admitting this mistake.

salman's picture

What do you expect from a DEMON (known terrorist and mentally challenged) in charge of this demon-itization.

It happens ONLY in INDIA

south40_dreams's picture

Why would they do this to themselves?  Oh never mind.....

Putrid's picture

The question is who are "they"?? 

Another regional indian.'s picture

'Cash' was not not banned in india. It is fake news. Only high denomination notes like 500 and 1000 ruppes were banned. And then govt again introduced 'cash' in the form of new 500 and 2000 rupee notes. 

Banning of cash means banning all notes not just high denomination ones and not introducing new notes in their place.

Putrid's picture

Piss off!! Who the fuck are you? Modi?

Does Modi read Zerohedge? Is that you Modi?

Love,
Putrid 

Dubaibanker's picture

Hey Putrid.....He doesn't understand economics, never mind monetary policy or M1, M3 flows....leave him alone, will ya...he is all mine! :) :)

Vilfredo Pareto's picture

The results will speak for themselves.   This is a multi generational loss of confidence in monetary authorities.   Indians are going to hide their capital even better than before.  They were surprised once.   They won't get surprised again.

Dubaibanker's picture

Indians already hide their capital well. Over 95% of illegal funds reside overseas in Swiss banks or overseas real estate just like Nigerians or Indonesians keep.

The biggest hit was on small business and farming assets/incomes who lost value overnight and hence had to lay off millions of daily wage or weekly wage workers. This is a huge problem in a country where almost 90% people work on contract basis, daily or weekly.

So only the poorest lost money and some middle class. No one else lost a penny.

Not one rich person was seen queuing up, nor 1 politician nor any corrupt bureaucrat or cops or judiciary which means they remained untouched while they have 90% of the illegally stashed funds.

India is a sad economic story just shuffling way too many balls in the air, each is named a different crisis.

It is a matter of time one by one all will fall from banks to industry to jobs to foreign funds to whatever large corporation is ready for an imminent collapse or national airline or another billionaire or it's currency or it's stock market or domestic terrorism or rabid politics or anti Muslim wave going on or no jobs for 99% graduates coming out each year.....etc. There are way too many balls in the air and too much time has passed.

Something gotta give and SOON!

Another regional indian.'s picture

Is modi the only indian, who exists?

Putrid's picture

Fuck you Modi!!

Putrid

Another regional indian.'s picture

If you are the chick in that picture...i dont mind. But if you are the dude in that picture.......then no!.

Putrid's picture

You get an up click for not being gay

LA_Goldbug's picture

The high notes were a means to have YOUR OWN BANK in your OWN house. A bank YOU CAN TRUST. Simple.

Another regional indian.'s picture

The govt introduced a higher denomination note now (2000 ruppe note) in place of the earlier 1000 rupee note.

Vilfredo Pareto's picture

At least our (((monetary masters))) such as Ben shalom bernanke and Janet Yellenstein are smart enough to realize confidence is what holds this shit together and that change must be incremental.

 

Indian monetary authorities have no credibility left.  No one trusts them now not to behave unpredictably, not that they had much trust and credibility to begin with.