--- title: "Effects of Demonetisation on Logistics Sector – Boon Or Bane" id: "214" type: "post" slug: "demonetisation-of-500-and-1000-rupees-notes-boon-or-bane-for-the-logistics-sector" published_at: "2016-11-10T11:49:28+00:00" modified_at: "2025-08-11T11:06:19+00:00" url: "https://locus.sh/blogs/demonetisation-of-500-and-1000-rupees-notes-boon-or-bane-for-the-logistics-sector/" markdown_url: "https://locus.sh/blogs/demonetisation-of-500-and-1000-rupees-notes-boon-or-bane-for-the-logistics-sector.md" excerpt: "Demonetisation of 500 and 1000 Rupee notes- Boon Or Bane for the Logistics Sector? Key Takeaways While the western side of the world is undergoing a major political sea change, India has been stumped by a surprise currency ban. Indians..." taxonomy_category: - "Fleet Optimization" - "Last Mile Delivery Optimization" taxonomy_post_tag: - "Digital Currency" - "India" - "Logistics Planning" - "Startup" --- #### [Fleet Optimization](https://locus.sh/blogs/category/fleet-optimization/) , [Last Mile Delivery Optimization](https://locus.sh/blogs/category/last-mile-delivery-optimization/) # Effects of Demonetisation on Logistics Sector – Boon Or Bane [Team Locus](/author/team-locus/) Nov 10, 2016 5 mins read **Demonetisation of 500 and 1000 Rupee notes- Boon Or Bane for the Logistics Sector?** ## Key Takeaways - The demonetization of 500 and 1000 rupee notes in India significantly impacted cash-on-delivery (CoD) transactions, which previously accounted for 60% of e-commerce retail sales. - Digital payment adoption showed immediate positive movement, with an 11% increase in online grocery orders and 12% increase in medicine deliveries following the currency ban. - The elimination of cash handling will reduce delivery time, security risks, and legal complexities for logistics operators while improving operational efficiency. - Locus’s logistics automation platform helps businesses navigate the transition to digital payments by optimizing delivery routes and reducing CoD-related returns through intelligent dispatch management. While the western side of the world is undergoing a major political sea change, India has been stumped by a surprise currency ban. Indians struggled to pay for basic goods like food and fuel yesterday and fretted about their savings, after the government withdrew 500 and 1,000 rupee notes from circulation in a bid to flush out money hidden from the tax man. The big question now lies- Is India shifting towards a cashless economy, will it become a digital economy soon enough? And how demonetisation effects logistics industry which contributes to as high as 14.4% of India’s GDP (according to Novonous). Almost 60 percent of the e-commerce retail happens on CoD basis in India. Most of the orders under the electronics and appliances category have an average value of Rs 4,500 and above. The payments for high value items are generally done through CoD. As they say, there are always two sides to a ‘note’, let us evaluate the pros and cons of this humongous transformation in India to the logistics industry: ## Demonetisation Cons: - There will be a temporary effects of demonetisation on logistics for CoD, especially for the more expensive items. - A huge number of delivery boys, drivers, warehouse loaders, who are dependent on weekly and monthly pays will be affected, especially in tier 2 and tier 3 cities. - There is going to be a huge dry up of purchasing power. - People will be more wary of making purchases online, due to their suspicion of fraud. - There will be a risk of over-using credit cards to make online purchases. This leads to more debt, than one can handle. ## Demonetisation Pros: - **Transparency increases**, as value of goods will be very open, for example a cement company may sell cement to different vendors and different prices through cash transactions. The ban on black money will give better visibility to business (small and large equal) - It has been observed that indirect cost of CoD services are much higher than direct costs due to **large share of CoD transactions** (as high as 60% by some estimates). This was making the whole business unviable for smaller players. Now smaller players will have a better chance of doing business. - As CoD payment cycles varies from 20 to 45 days, it blocks significant capital for high volume websites. With a digital first approach, businesses will have a **high working capital**. - One of the single biggest reason for delivery failures has been CoD. The reverse logistics arising from CoD defaults, returns can play havoc with the inventory costs as products must be examined and restocked. With that reducing, enterprises will see a [drop in logistics costs](https://locus.sh/blogs/last-mile-delivery-costs-bringing-order-to-chaos/) as the rate of re-delivery will fall drastically. - While India has an internet user base second only to China, only 14 per cent of the total internet users shop online in India, as compared to 30 to 35 per cent in Brazil and Russia, and 55 per cent in China. In the coming years, potentially 40 million shoppers in the age group of 19 to 24 years are expected to spend time and money online. This trend is rapidly aligning with [e-commerce retailing](https://locus.sh/blogs/locus-60-second-guide-to-omnichannel-retail/) , to **facilitate the logistics sector’s growth**. - The agents handling delivery usually have a lot of cash to handle. A lot of security and legal formalities have to be done to protect companies from theft. With these changes, operations will be **more efficient and quicker**. The transaction time at the drop location will reduce significantly which will foster a higher number of orders being delivered on time. In just one day, this abrupt step was **fraught with problems** for an economy largely fuelled by cash. However, on the digital front, there was positive movement, not significant enough to make predictions, but definitely showed an upward trend. To validate this with numbers, Locus, a [logistics automation platform](https://locus.sh) , saw about a **11 percent increase** in online orders of [groceries and basic goods](https://locus.sh/blogs/last-mile-delivery-route-optimization-for-online-grocers/) and a **12 percent increase** in medicines that were ordered online and delivered to doorsteps. While Locus did see an increase in number of orders, there was a small percentage of returns on the CoD orders due to unavailability of cash. As a consumer, if you depend on small notes (which is the great majority of India) to pay for your groceries, household items?—?it could be difficult over the next one week to do so. It seems like, in the immediate term there is going to be a short downfall in movement of goods but with the increase in use of plastic money, we can see more transparency in the process of tracking goods. Management will be able to make quicker and better decisions leading to more business overall. ## Some interesting facts: According to the RBI press conference, there are 16.5 billion ‘500-rupee’ notes and 6.7 billion ‘1000-rupee’ notes in circulation right now. In addition to this, RBI data shows that the share of Rs 1,000 notes in the stock of currency in circulation at the end of financial year 2014–15 was 39%. Rs 500 notes accounted for a further 45% of currency stock. Putting it simply, a little over 80% of the cash in India (by value) will be worthless pieces of paper. Stay tuned to Locus’ Blog to know how the [banking logistics](https://locus.sh/blogs/convenience-as-a-currency-locus-for-bfsi/) will be impacted with the ban of 500 and 1000 currency in India. **Like what you’re reading? Hit ? and**[follow us](https://locus.sh/blogs/) **to read more.** > [Last Mile Carrier Tracking and Why it matters for Businesses in 2020?](https://locus.sh/blogs/last-mile-tracking-and-why-it-matters-for-businesses/) This post was authored by: **Sreshtha Das** MEET THE AUTHOR Team Locus Written by the Locus Solutions Team—logistics technology experts helping enterprise fleets scale with confidence and precision. ### Related Tags: [Digital Currency](https://locus.sh/blogs/tagged/digital-currency/) [India](https://locus.sh/blogs/tagged/india/) [Logistics Planning](https://locus.sh/blogs/tagged/logistics/) [Startup](https://locus.sh/blogs/tagged/startup/) [https://locus.sh/blogs/reverse-logistics-forward-thinking-pays-big-dividends/](https://locus.sh/blogs/reverse-logistics-forward-thinking-pays-big-dividends/) #### [E-Commerce](https://locus.sh/blogs/category/ecommerce-fulfillment/) ## [Reverse Logistics : Forward Thinking Pays Big Dividends](https://locus.sh/blogs/reverse-logistics-forward-thinking-pays-big-dividends/) [Team Locus](https://locus.sh/blogs/author/team-locus/) Sep 26, 2016 Key Takeaways “The line between disorder and order lies in logistics”?—?Sun Tzu, The Art of War Over the past few years, the global logistics industry has witnessed an increased interest in product returns, recovery, exchange and redistribution. Stats validate that 8 to 9 percent of goods purchased at brick and mortar stores and 25 to […] [Read more](https://locus.sh/blogs/reverse-logistics-forward-thinking-pays-big-dividends/) [https://locus.sh/blogs/the-logistics-of-demonetization/](https://locus.sh/blogs/the-logistics-of-demonetization/) #### [Dispatch Management](https://locus.sh/blogs/category/dispatch-management/) ## [Demonetization on Banking Logistics: Challenges, Impact, and Optimization Strategies](https://locus.sh/blogs/the-logistics-of-demonetization/) [Team Locus](https://locus.sh/blogs/author/team-locus/) Nov 12, 2016 Key Takeaways For banking operations leaders, cash logistics managers, and supply chain professionals navigating large-scale currency disruptions — this analysis breaks down the operational challenges of demonetization on banking logistics and the technology-driven strategies that solve them. India’s 2016 demonetization was not merely a monetary policy decision — it was one of the largest logistics […] [Read more](https://locus.sh/blogs/the-logistics-of-demonetization/) ## Effects of Demonetisation on Logistics Sector – Boon Or Bane - Share - [Print](javascript:window.print()) - [Download](#) - [Schedule a Demo](https://locus.sh/schedule-demo/) ### Is your team spending more time on fixing logistics plan than running the operation? - Agentic transportation management from order intake to freight settlement - Route optimization built on 250+ real-world constraints - AI-driven dispatch with automatic execution handling 20%Cost Reduction 66%Faster Planning Cycles [Schedule a demo](/schedule-demo/) Insights Worth Your Time #### [General](https://locus.sh/blogs/category/general/) ## [Locus 2026 US Consumer Survey: Generative AI isn’t Just Changing How Consumers Shop, it’s Breaking the Demand Patterns US Retail Was Built On](https://locus.sh/blogs/generative-ai-shopping-effect-retail-fulfillment-operations-locus-q2-2026-consumer-survey/) [Ishan Bhattacharya](https://locus.sh/blogs/author/ishan_locus/) May 29, 2026 #### [General](https://locus.sh/blogs/category/general/) ## [Embedded vs Bolted-On AI: The Architecture Question European Logistics Buyers Are Asking](https://locus.sh/blogs/embedded-vs-bolted-on-ai-european-logistics-platform-architecture-business-benefits/) [Aseem Sinha](https://locus.sh/blogs/author/aseem_locus/) May 21, 2026 #### [General](https://locus.sh/blogs/category/general/) ## [Hybrid Fleet Management: How Owned, 3PL, Gig, ICE, and EV Capacity Actually Operate at Most Enterprises](https://locus.sh/blogs/three-workforce-fleet-reality-owned-3pl-gig-drivers/) [Aseem Sinha](https://locus.sh/blogs/author/aseem_locus/) May 7, 2026 #### [General](https://locus.sh/blogs/category/general/) ## [US Returns Hit $850 Billion in 2025: Why US Retailers Are Restructuring Reverse Logistics in 2026](https://locus.sh/blogs/850-billion-us-returns-ai-routing-reverse-logistics-2026/) [Ishan Bhattacharya](https://locus.sh/blogs/author/ishan_locus/) May 7, 2026