The Effects of Demonetization on Small and Medium Enterprises (SMEs) in India: A Survey-Based Study

Abstract

This research paper examines the effects of the 2016 demonetization in India on Small and Medium Enterprises (SMEs) in North India, focusing on financial, operational, and psychological impacts. The study employs a survey-based methodology, collecting data from 160 SMEs across five states: Punjab, Haryana, Uttar Pradesh, Uttarakhand, and Himachal Pradesh. The results reveal significant declines in revenue and profit margins, with 68.75% of SMEs reporting decreased revenue. Additionally, 62.50% of SMEs reduced their workforce, highlighting operational challenges. Psychological impacts were profound, with 63.75% of SME owners reporting high stress levels. Despite these challenges, 79.38% of SMEs adopted digital payment methods, indicating a shift towards digitalization. The study underscores the need for comprehensive support mechanisms, including financial aid, digital training, and mental health support, to enhance SME resilience during economic disruptions. These findings provide valuable insights for policymakers, financial institutions, and stakeholders to design targeted support measures, ensuring the sustainability and growth of SMEs in the face of future economic challenges.