Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

While ATMs in India are still waiting to get refilled, analysts' spreadsheets are finally getting populated. The high-frequency statistics they need to weigh the impact of the country's bizarre currency ban are slowly trickling in. By the looks of things, some earnings forecasts may escape with just a trim; others may need the slash-and-burn treatment.

A Cashless Gloom
Analysts have cut their forecasts for FY 2017 Indian corporate earnings since India's currency ban
Source: Bloomberg
*Market capitalization weighted average.

Sample two pieces of data from Tuesday: a 19 percent drop in auto sales in December, and a 61 percent plunge in new apartment launches in the fourth quarter. The former is the sharpest fall in 16 years; the latter is the worst performance in six years, according to Knight Frank.

While that gives a handle on big-ticket consumption, there's still much uncertainty in everyday consumer goods. Analysts at Elara Securities India Pvt. like companies such as Hindustan Unilever Ltd. and Godrej Consumer Products Ltd. because they rely least on wholesalers to sell food, soap and hair color. Nevertheless, third-quarter earnings are unlikely to have been great for consumer staples.

Wheels Came Off
Big-ticket consumption in India took an immediate hit following the Nov. 8 currency ban

Reaching shop shelves in a country of 1.2 billion people was never easy. It's bound to have gotten costlier after the government summarily outlawed 86 percent of the country's legal tender.

By the end of last quarter, India's central bank had managed to replenish only about half the currency that circulated before the Nov. 8 shock. The rest has gone to banks, but deposits can't yet be freely exchanged into cash, and that's problematic for cash-only retailers. They're being forced to sell on credit. Higher working capital costs are getting passed on to consumer-goods makers at a time when commodity prices are rising. Protecting volumes might mean sacrificing margins. Or vice versa.

Margin Squeeze
Consumer staples are getting more expensive to make because of rising commodity prices
Source: Bloomberg

The squeeze isn't restricted to staples and retail. Even after letting go of workers, small businesses are finding it hard to cope. So they're skimping on debt repayment.

Rating company ICRA, a Moody's affiliate, tracks 23 loan pools in which borrowers are typically from industries such as auto ancillaries, textiles and plastics, and the ticket size of debt is up to $22,000. The collection efficiency of these pools slid from 95 percent in October to 83 percent in November. If this leads to a tightening of credit standards, the effects could linger even after the economy has all the cash it needs. That would delay rehiring, and blunt the edge of a much-anticipated cut in the central bank's benchmark rate.

The analysis profession is handicapped: There's nothing in its toolkit to foretell the dynamics unleashed when buyers want to buy and sellers want to sell, but purchasers don't have enough legal tender. The sharpest earnings downgrades since Nov. 8 have been in real estate, consumer discretionary goods, telecommunications and banking. Donald Trump's election victory and fears of tighter visa norms in the U.S. have led to a (much milder) decline in Indian software and technology companies' profit estimates for 2017.

Still, the most honest guess on Indian corporate earnings is perhaps to be found in the title of a recent Jefferies report: "Heaven Only Knows."

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andy Mukherjee in Singapore at

To contact the editor responsible for this story:
Matthew Brooker at