In a scathing report, India's largest trade association representing over three lakh manufacturers has said that all industrial activity has come to a standstill because of the ongoing cash crunch, with small scale and micro-sector firms reporting 35 per cent drop in employment, and 50 per cent decline in revenue in the first 34 days after demonetisation.
The Indian Express reported the All India Manufacturers' Organisation (AIMO) study that predicts that employment in the sector is expected to further drop to 60 per cent and revenue is expected to decline by 55 per cent before March.
Similar declines were reported by medium and large scale infrastructure and export-oriented companies.
Large infrastructure projects such as big-ticket road construction saw a 35 per cent drop in employment, and 45 per cent revenue decline; while export-oriented companies including foreign companies reported a 30 per cent job losses and 40 per cent revenue fall. Companies in both these sub-sectors expect employment and revenues to fall further by at least five percentage points by March.
The study cited factors such as "zero cash inflow, cash withdrawal restrictions, staff absenteeism, bleak fundraising options, inability of banks to work on proposals, derailed real estate sector, fear among foreigners, poor preparedness, and uncertain status of GST," said the IE report.
The organisation says it has been sending its findings to the Union commerce and finance ministries but hasn't received a response.
The AIMO comprises over three lakh micro, small and medium to large scale industries in the manufacturing and export sector.