In the luxury tobacco market, weekend transactions are usually steady, except some upswing during the wedding season. But this past weekend, Raahul Kapoor, the co-founder of The India Cigar Club, a seller of imported tobacco, fielded an unusual number of inquiries. Most buyers had an additional query: “Do you accept ₹2,000 notes?”
The question offered a glimpse into the unintended repercussions of the Reserve Bank of India’s (RBI’s) decision to withdraw the high-value banknotes.Luxury retailers experienced a sudden uptick in business after RBI’s recent mandate to withdraw the highest denomination ₹2,000 note from circulation. Although these bills remain legal tender, a reluctance to endure lengthy queues at banks and the potential association of high-value notes with unaccounted funds have driven the affluent to spend money on luxury items rather than deposit it in banks.
Kapoor’s other luxury venture, Surya Concepts, also received more than average inquiries for gold-dusted chocolate truffles and fudges. “We sold ₹4 lakh worth of truffles in ₹2,000 notes, unlike in any other month where we sell about ₹1 lakh worth,” he said.
“It will not be surprising if we see a lot of people over the next few months buying massy luxury brands,” Kapoor said.
The past weekend also saw a notable shift away from credit card transactions to cash, mostly in ₹2,000 notes, according to Vishal Anand, the CEO of Moonshine Food Ventures, which operates fine-dining restaurants such as Saga in Gurugram and Farzi Cafe in Aerocity, among others.
“The usage shot up a little bit, but people did not spend more just to get rid of the cash,” he said. Anand said that the denomination had been out of circulation for a while now, “so most people knew this was coming”. “We are accepting it and depositing in the banks,” he said.