The Indian SME sector is yet to be as organized as those in other strong economies around the world. The sector contributes almost 45% of the country’s industrial output and has recently begun understanding its potential and accelerating the pace at which it develops. But amidst the many policies and schemes that the government launched to empower SMEs, demonetization brought a sudden wave of uncertainty in the businesses, with entrepreneurs trying hard to look for ways to conduct business transactions normally.
Demonetization brought an unforeseen change in the economy, making cash obscure for SMEs. Since dire situations call for dire actions, SMEs have begun to look for ways to ensure the usual running of the business. While many SMEs indulged in the practice of paying their workers in cash, the recent turn of events calls for necessary changes to automate salary transactions and payments to vendors.
Where most of the financial transactions in the sector were informal, with cash being paid directly instead of using the formal methods of payment which will help the economy understand the current standing of the industry since demonetization reduces the ability of SMEs to leak cash or profits through the system. This can give way to higher declared profits which can in turn lead to expansion, increase in jobs, better use of technology and better customer satisfaction.
Since banks also have more cash as a result of the deposit of old 500 and 1000 rupee notes, the lending rate may be reduced for SMEs too. Demonetization has also encouraged the use of ecommerce platforms, bringing more and more SMEs to the internet world.