There are two types of realities, the real world full of trees, rocks and rivers and imagined realities. Imagined Reality deals with companies, money and other institutions that exist because humans allow them to. Money is legal tender and is used by governments and people to conduct business. On November 8th, 2016, the Modi-led government scrapped all Rs 500 and Rs 1000 notes. This caused widespread chaos and has subsequently affected the affairs of many businesses, including Larsen and Toubro’s Electrical and automation business.
However, the business has now reported good news, that it is in recovery from the impact of demonetization. The engineering giant of a company that is worth an estimated $16 billion handled most of its retail business in cash. As such, when the ban on cash came through, Larsen and Toubro lost many clients who transacted mainly in cash.
SC Bhargavam Senior Vice President and head of the business remarked, “I am keeping my fingers crossed that it will not turn out to be as bad as we had anticipated. I am hopeful that we will be able to get over the impact that we saw due to demonetization.”
Following the shocking political move, many businesses expected there to be widespread panic and chaos. While some turbulence has been continually experienced, Larsen and Toubro think otherwise. “In November, all of us got shocked, and the retail business was hit, but three months down the line we can say that the fears were much more than what happened. Business has been ok.”
During some of the heated exchanges following the government’s decision to demonetize, Senior Congress leader commented, “I think it is a terrible mistake. It is done without full information, without understanding the nature of black money…Without fully understanding the implications of withdrawing 2400 crore notes from circulation…Without preparing the printing of new notes and also without understanding the role played by ATMs.”
The move to demonetize was to move the country closer to a cashless economy and therefore drain the swamp that is corruption and black money. The move has faced stiff opposition with politicians such as Chidambaram stating, “If 46% is cash transaction in the USA, how can India become 100% cashless. Is India completely WiFi connected…Is electricity available 24 hours a day and whether every Indian has a bank account?”
Businesses such as the Larsen and Toubro Automation unit have faced difficulties in staying afloat. Being major cash players, such companies have seen their coffers run dry as their customers lack the money to pay for goods and services. For Larsen and Toubro, its E&A business accounts were responsible for 5% of the entire company’s revenue streams.
The company is hopeful that its roster of industrial clients will come back and start buying good and services. Prime Minister Modi launched the move with the goals of eliminating black money and corruption that disrupts vital public services such as health and education. As politicians tear into each other over the bill, some have gone ahead to state, “In a democracy, no one has the authority to take unilateral decision and impose it on the people,”
