India’s diesel demand to drop in first quarter

India’s diesel demand to drop in first quarter

Diesel demand in India might drop in the first quarter as a government decision to abolish high-value currency bills is expected to hurt small businesses, analysts said.

Diesel demand is expected to grow only 2 percent in the first quarter of 2017 compared with a year ago, less than half of the 5-percent growth rate seen in the first 10 months of 2016, said Tushar Tarun Bansal, director of Singapore-based consultancy Ivy Global.

In November, India Prime Minister Narendra Modi scrapped 500- and 1,000-rupee notes as part of a crackdown on tax dodgers and counterfeiters. Nearly 90 percent of transactions used to be in cash in India, which was gripped by a severe shortage of currency after this sudden decision.

“The cash crunch is affecting sales of two- and three-wheelers, and liquidity has not been enough to sustain small businesses, which are struggling to survive,” said a fuel trader from India. Read More…

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