Impact of Demonetization on the IT Industry


India Inc. is eagerly waiting to see the impact of demonetization thanks to the government’s effort to bring in a cashless society. Although the move can give a boost to the IT sector, all depends on the swift response of businesses especially the SME and MSME segments to stay connected for cashless transactions. This point requires more explanation that calls for in-depth research on consumer preferences to use IT, the inclination of businesses to embrace IT so that they won’t be left out in the competition unleashed by established players who are smartly leveraging IT.

To understand in simpler terms, let us analyze cash. Cash is all about buying and selling. When cash is eliminated in the buying and selling process, IT steps in. This automatically amounts to more IT intervention in our day-to-day lives. But there comes the willingness and agility of businesses to leverage IT for customer connect and profit maximization. Businesses offer products and services; customers want to use the same. The established businesses anyway have their customers who have changed their preferences to go cashless. They are the top layer of the pyramid who don’t need to be in the queue for cash in banks or ATMs. We are focusing on the micro-segment as they are the ones who are facing the challenge. These small players used to do business with cash or credit with the known customers whom they have been comfortable with. So, in the absence of cash what the consumers will do? One scenario is they waiting for cash to come or change their purchasing preferences to do business with large players. If this happens demonetization will overkill the micro traders.

On the other hand, if they take a proactive step to retrieve the customers who were doing earlier transactions with them, the micro sector can stay afloat in the demonetization tsunami. It is in this process, IT can make an impact, but for this, great marketing efforts are needed.

Let us analyze relevant sectors affected by demonetization one by one.

Advantage Digital Marketing & E-commerce

In the earlier scenario, the MSME segment was not that enthusiastic about digital marketing efforts. But in the changed scenario, if small businesses want to survive, they need to resort to digital marketing and e-commerce where sales conversion can be done in mobiles and payment comes directly to the bank account of the micro business. For example, in the case of Kirana stores which was not doing much digital marketing, have to place their ads on products and services, display Facebook page link, or website address link to tell the customers, how they will be benefited if they buy from them. In this process, there are millions of micro businessmen requiring digital marketing services and e-commerce.

Of course, this is challenging as digital marketing and e-commerce in vernacular languages are required to tap the new customers. This means people should be educated, small traders need to be connected with immediate effect. But who will take the initiative as these call for massive investment? I personally feel the best way out is to empower digital marketing agencies by the government to make things happen faster. If not, what will happen. The longer the wait, the faster the death of micro-segments. The bottom line is, of course, there is a great opportunity to bring in unaccounted wealth to countable wealth, where the government gets more revenues in the form of tax.

Fillip to Big Data & Analytics

India is such a complicated country where diverse interests co-exist. When billions of new customers, thousands of micro traders enter e-commerce, businesses will become as usual with more competition sets in. Herein comes the importance of agility. If businesses have to survive longer, they need to understand the consumer psyche cutting across communities. By observing and analyzing their purchasing patterns, retailers can offer tailored products and services to attract and retain new customers. This provides an opportunity for IT sector to provide custom IT solutions that should be cost-effective. IT consultants and vendors need to think how to provide cost-effective IT solutions to the micro-segment.

Think another scenario, if the entire farm sector is tapped for cashless transactions, we need thousands of swiping machines, software for the same. Since there will be massive transactions through credit and debit cards, processing speed of software matters. Gear up for effective software that can enable swift transactions.

On the other hand, big data and analytics are providing opportunities for thousands who can manage big data in vernacular languages instead of English. MSME sector needs to think on skilling drive to millions of graduates to handle content for digital marketing, e-commerce, and deriving key insights from big data in regional languages.

Digitization of Real Estate Transactions

So far, the realtors raked in with paper transactions. Digitization real estate transactions will be another opportunity for IT sector to bring in all transactions under the tax net. Custom solutions for banks and real estate make sense for aspiring IT vendors. Such apps can remove all paper works eliminate stamp papers and the role of registrars. All directly under the state government, sharing all relevant information to the central government. This will help in eliminating all dubious transactions promoted by anti-nationals.

Banking and Finance

Banks require the segment-wise breakup of all transactions, large data, important data etc. For example, the government wants to track the purchasing habits, spending habits, luxury habits etc., to gauge how taxable they are against how much they are actually paying now. Such initiatives can fill the government coffers through reasonable tax practices. It is in this area IT vendors need to think about providing solutions.

On the other hand, IT vendors also need to think on additional layers of security for mobile transactions as we have had enough with the hacking of accounts, credit card and debit card fraud.

Telecom Sector

Cashless transactions mean bringing in billions of Indians to use smartphones for e-commerce, cashless transactions, online payments etc. This will call for fast internet services otherwise slow transactions can take its toll on the very credibility of IT services. Telecom sector can think and act on 5G services.

Advantage job sector

IT sector requires more professionals in the wake of demonetization. Jobs in digital marketing, online promotions, content management, e-commerce, website management, analytics, data science, and mobile app software. But all depends on the agility of MSME sector to implement IT implementation faster instead of waiting for favorable scenarios.

Conclusion and Challenge

For a country like India, it is like exiting from one yuga and enter another yuga. From cash transactions to cashless transactions, the government needs to do a lot of background work. This could have been done earlier. Even now also the government is not late to win back the confidence of businesses and customers. Now the onus is on the government to empower different stakeholders who can step into the breach. These can include IT stakeholders, educational institutions, government institutions, self-help groups, politicians, et al need to network and work together. Let us together tackle the challenge.


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