Indian automotive giant Tata Motors has seen its business suffer as a consequence of the government’s recent decision to bar high-value bank notes. The company’s profits for the past quarter took a drastic dip.
Tata Motors reported on Tuesday a 96 percent fall in its quarterly profits, with consolidated net profit for the three months ending December dropping to 1.12 billion rupees ($16.73 million, 15.77 million euros) from 29.53 billion rupees a year earlier.
At the same time, revenue fell 4.3 percent to 685.41 billion rupees.
The drop in the profit and revenue was driven by a fall in demand for the firm’s commercial vehicles owing to the Indian government’s abrupt move in November to pull high-value banknotes from circulation, the Mumbai-based company said.
“The segment witnessed major pressure with a fall of nine percent year-on-year” in sales, it noted.
Its Jaguar Land Rover business saw “lower wholesale volumes and relatively weaker product mix… and overall higher marketing expenses,” Tata Motors said in its statement.
A radical move
Prime Minister Narendra Modi’s so-called demonetization drive removed around 86 percent of India’s cash at a stroke, triggering massive queues outside banks and a daunting cash shortage that has hit businesses across the country.
The government has said the move will bring billions of unaccounted money into the formal banking system and clean India’s economy of “black money,” a term used in the country to refer to unaccounted, untaxed wealth.
But Modi’s administration has faced sharp criticism over the decision and for its slow pace of introducing the new notes, with banks running out of cash and ATMs having to be recalibrated to cope with the different sized bills.