The leather and footwear businesses in India were among the first to bear the brunt of the government's decision in November to discontinue its biggest denomination currency notes overnight in a move that it says will curb corruption and black money.  

In a surprise announcement on Nov. 8, Prime Minister Narendra Modi said that Rs500 and Rs1,000 banknotes would carry no value from the next day, throwing the country's small and medium-sized leather companies, which buy raw materials and pay their employees in cash, into chaos, reports Jean-Pierre Bidegain, the international shoe expert from France.

The majority of these businesses do not have bank accounts and in recent days have found themselves without enough liquidity to make purchases and pay their employees, who in turn have had to queue up for several hours at local banks to exchange their savings for smaller denominations.

As a result of cash shortages and absenteeism, production at a number of companies has shrunk by over 50 percent, according to local business associations.

The situation is likely to result into delayed deliveries, particularly to overseas customers, and some local companies said they are bracing for hefty penalties