Indian government’s decision to scrap high-valued notes of Rs 500 and Rs 1000 which accounts for more than two-third of the cash stream will lead to “immediate but temporary” fall in device sales in Q4 2016, according to research firm IDC.  Every financial year, consumer purchase of PCs, smartphones, and tablets in India witnesses a slowdown post festive sales. However, due to the prevailing cash crunch situation, significant slowdown has been observed in both offline and online retail channels, added the research firm.

Mobile phone segment

In the mobile phones segment, IDC analysts revised the estimated sales growth downwards by 4.5%. For Q4 2016, feature phone shipments are expected to decline sharply by 24.6% and smartphones shipments are expected to drop by 17.5% quarter-on-quarter.

PC segment

For the PC segment, IDC has cut down sales forecast down by 3-5% sequentially. PC shipments in the consumer segment are expected to drop 33% in Q4 2016 since most of the consumer PC sales takes place at offline retail stores. However, the commercial or the enterprise segment continues to be generate healthy demand and “seems to be the least impacted by demonetization move”, according to the research firm.

Tablet, slates and detachable segment

The Indian tablet industry shipped 1.06 million units in Q3 2016. This is the first time in this financial year that the tablet shipments have crossed the 1 million mark. However tablet shipments are expected to drop by 23% quarter-on-quarter in Q4 2016 due to the cash crunch.

Sales will level out once cash flow turns normal

The research firm said that Cash on Delivery makes up a “substantial portion” of online sales and several ecommerce sites like Amazon, Snapdeal and Flipkart had suspended COD orders temporarily post the demonetization announcement. This has impacted overall device shipments. Most of the impact in both offline/online retail has been seen in Tier 3 and lower cities, where smaller retail shops transact more in cash. However, the slowdown in device sales is expected to level-out once the cash deficit reduces, added IDC.

 “Although the early indications of October shipments were healthy, due to relatively poor sales in November, the inventory in channel is piling up which could take some time to liquidate as the cash deficit reduces. However, we expect this to be a temporary impact on the market, as shipments are likely to revive to normal run-rate and channel inventory health to improve by second half of Q1 2017” says Jaipal Singh, Market Analyst, IDC India.”