The After-Effects of Demonetization on the Logistics Industry

The logistics industry has been going through a slump over the past couple of months owing to the cash crunch brought along by demonetization. When it all began, the nation was awestruck by the haste with which the government went ahead with the decision. While this was seen as a great move against black money hoarders, the cash crunch afterward also brought along quite a few issues within the sector.

Once the Indian Prime Minister came out to announce that Rs.500 and Rs.1000 rupees notes will no longer be considered legal denominations for transactions across India, several sectors went gasping for breath. Most of the business transactions across India take place in the form of cash, and that was reason enough to be concerned for the entire Indian business fraternity. Right after, it didn’t take time for various sectors to try and mitigate the issues. But, our focus shall be on a sector that has been heavily cash-driven, i.e. Logistics.

Demonetization: The Bad, the Good, and the Great

First and foremost, the transit processes are such that the fuel and upkeep/maintenance of trucks is taken care of by the drivers with cash at hand. Amongst the causes for concern, here are few:

Plastic Money Penetration in India is far from optimal.

• The usage of credit cards and cash cards has increased over the past years, but it is still far from optimal. Demonetization and its implementation is highly dependent on a surge in plastic money usage. This is one thing that hasn’t improved even after the implementation of the demonetization move to the extent that it should have.

Trucks have to Travel through-and-to Rural Areas

• The off-loading of vehicles can sometimes be needed at warehouses located in interior regions of the country. These are regions in which cashless transactions cannot be expected all of a sudden. In fact, the lack of awareness about credit card usage amongst rural and suburban people will be hard to overcome.

Expenses During Transit

• During the movement of trucks, there are various essentials that need to be handled by the driver himself. These include the fuel payments, maintenance, challan, and other documentation requirements that warrant payment as well.

Here’s What to Expect in the Times to Come

While the cash-strapped economy is already limping back to normalcy, there are surely going to be some permanent changes in the Indian business arena. While full online compliance of transactions isn’t something that can be expected in the recent future from the logistics industry, partial compliance is already underway. This will surely boost the taxation levels for the economy and enhance transparency within the sector.

Here are some positive pointers for the industry and what this new ‘era’ in the aftermath of demonetization will bring:

• Convenient transactions.
• Higher levels of transparency.
• Easier tracking of transactions.
• Higher questionability of employees.
• Minimized leakages in payment processes.

Conclusion

The past months have been difficult for the logistics industry as drivers were left stranded at crucial transit points without cash, and logistics firms had to replan their strategy and reroute cash flow. However, in the long run, this change shall usher in the era of technological adoption as well. This shall bring in unforeseen levels of transparency and also boost the way that things are handled in real time via the process. Online payments leave a trail which can help in tracking and tracing of the payment gateways and various points of expense for transportation firms.

At Quikhop, we have a largely positive outlook regarding these changes as our chief motto of technological adoption across the spectrum shall be aided thanks to this decision. This decision and the implementation of GST are two major things that shall define the path that the logistics industry will take. Let’s wait with bated breath!

Originally published at blog.quikhop.com.