Godrej Group Chairman Adi Godrej said demonetization is a well-timed move, in view of the proposed rollout of the Goods & Services Tax (GST) early next year.
“Demonetization will certainly be a good thing in the medium to long term. It will clearly help in reducing black economy in the country,” Godrej said in an interview with BTVi.
Demonetization move would also help in reducing fake currencies that used to come from across the borders to finance terrorism and cut down the black money used to finance Naxalism, he said.
“The evasion of indirect taxes will become difficult when Goods & Services Tax (GST) is put in place. With the introduction of Goods & Services Tax likely soon, this is a good time to introduce demonetization,” Godrej said.
After the demonetization drive, it would also become difficult for the people to accumulate black money in future, he said.
Godrej said shortage of cash, particularly in the first week after the announcement of demonetization, affected the individuals and businesses and with the improvement in cash flow, most of the businesses have seen considerable improvement.
The Godrej Group Chairman, however, said getting rid of all the black money would be nearly impossible.
Commenting on the Government’s efforts towards cashless economy, he said, “Going completely cashless is not possible and no country is completely cashless. What they mean is less cash would be used in the economy. After demonetization, cash has already come down.”
Asked about the impact on Godrej’s businesses, he said, “In November, we had a small reduction in sales, but in December, our sales are good. Godrej Consumer Products Ltd’s December sales are back to normal. We expect to end the third quarter quite well. Our rural sales are doing quite well.”
He said the fast-moving consumer goods (FMCG) segment would recover at a faster rate from the demonetization impact and consumer durables would follow the recovery line.
“By the end of December, things will be very much normal and by the end of this financial year, there will be full recovery. Even if some sales were lost in this quarter, this will be made up for in the next quarter.
“Once there is sufficient cash available and other systems of payments replace cash, that will be replenished,” he added.
Godrej felt that there has been “over criticism” of the situation arising out of the demonetization move.