India's so-called demonetisation - the withdrawal from circulation of 500 and 1,000 rupee notes - appears to have precipitated increased interest in letter of credit (L/C) transactions.

Cash has so far dominated business-to-business trading in some areas of the Indian economy, but the sudden withdrawal of the country's largest notes and the attendant shortage of cash has forced traders along whole supply chains to use alternative transaction types.

Negative impacts

The fruit and vegetable supply chain has been particularly hard hit by demonetisation according to Thirukumaran Nagarajan, CEO of Ninjacart, an online marketplace that connects farmers and brands to retailers.

He says the process has badly affected the entire supply chain, including farmers, haulage companies and vendors while the cash crunch has led to a major drop in prices and outright losses for some.

Alternative payments

"We are working on IOUs and L/Cs, because there is no cash in circulation at the retail or farmer end," Nagarajan told local media.

"Despite a bumper harvest..., farmers could not hire labourers. By the time they could borrow and pay workers, crops wilted and prices crashed," he added.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.