The November 9 demonetisation is likely to dent domestic two-wheeler sales in the near term, rating agency ICRA said on Tuesday.
Restrictions on cash transactions are expected to affect the demand for the entry segment of two-wheelers which are cash-purchase driven.
The sector achieved a 16 per cent growth during April-October period in the current fiscal.
“Rural markets account for about 60-65 per cent of the entry segment motorcycle sales and given the high propensity for cash purchases in the rural markets, the entry segment of the motorcycles is expected to be a casualty,” the ratings agency said in a statement.
Favourable monsoon has been a significant trigger for healthy demand from the rural markets during the current fiscal, most of the sales have been sentiment driven. The Hharif crop sales have also commenced in October or November.
However, the recent scrapping of high denomination notes and the consequent constrained liquidity may result in dip in realisations as well as delay in realisations of crop sales. It will cause postponement of demand for such vehicles, the agency said.
“Unavailability of adequate cash during the preparation of sowing time for next Rabi season is also likely to have a bearing on farm incomes in the next season,” it added.