Is the cash crunch behind Andhra and Telangana topping e-transactions in India?

What makes the two Telugu speaking states star performers in PM Modi’s Digital India dream?
Is the cash crunch behind Andhra and Telangana topping e-transactions in India?
Is the cash crunch behind Andhra and Telangana topping e-transactions in India?
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Five months after Prime Minister Narendra Modi announced the demonetisation of high value notes, Telangana has recorded the highest number of electronic transactions per 1000 per persons while its neighbour Andhra Pradesh tops the country when it comes to overall number of e-transactions.   

According to  data published by the Ministry of Electronics & Information Technology, Telangana leads the country with 2,784.20 e-transactions per 1,000 persons, and Andhra Pradesh comes a close second with 2713.30 digital transactions. Overall, however, Chandrababu Naidu’s state has recorded 13.42 crore electronic operations from January 1 to April 15, while Telangana has over 9.79 crore transactions.

So, what makes the two Telugu states star performers in Modi’s Digital India dream? 

Andhra Chief Minister Chandrababu Naidu was quick to get off the blocks post-demonetisation, launching AP Purse, a mobile application that aggregates e-wallets. While the Telangana government also announced that it would launch a mobile wallet, KCR is yet to follow through on his plan.

Professor Galab, an economist points out, “Following the bifurcation, both CMs have been competing with each other. One of the biggest reasons is the political dynamics of both states. To make both the states digital, they have been working towards a cashless economy.”

But the motive behind pushing for cashless transactions may have to do with “early bird benefits” from the Centre, writes GS Radhakrishna in Firstpost. With the two southern neighbours vying for central assistance for infrastructure projects, Telangana and Andhra were quick to encourage cashless transactions in their respective states.

Telakapalli Ravi, a Hyderabad-based economist argues that attracting investments is the motive behind the digital push. “Both the Telugu states want to attract more and more investors. That was one of the reasons why both states have been working towards digitalisation,” he says.

He also notes that the competition between Telangana and Andhra is evident given that the sons of the two CMs are driving the digital push, with KT Rama Rao and recently inducted Nara Lokesh being the IT Ministers for their respective states.   

But Ravi observes that digitalisation by the two Telugu speaking states was forced upon them by the Centre. The acute cash crunch in the two states gave people no choice but to switch to e-transactions.

While urging his officials to roll out more measures to promote cashless transactions, CM KCR had in December noted, “The Centre wants the people to move towards digital transactions, but cash is not available in banks. People are facing hardships, and the State cannot remain a mute spectator.”

Venkateshwara Reddy, General Secretary of Regional Rural Bank Employee Union observes, “Telangana and Andhra Pradesh have topped in cash shortage, while Delhi is hardly facing any cash crunch now. There is no other option for people other than digital transactions. That is one of the main reasons for the increase in e-transaction in both the Telugu states.”

He also argues that Assembly Elections in Uttar Pradesh and Punjab diverted cash supply to the northern states, thereby causing a cash crunch in southern India, especially Telangana and Andhra Pradesh.  

Post-demonetisation, Reddy says, there has been a 15% increase in new bank accounts in both Telangana and Andhra Pradesh.

Ravi, however, points out that the truth behind the success of digitalisation lies in whether villages in these states have really gone cashless.  “It is a good sign that people are accepting digitalisation, but rural areas are still suffering because of the cash shortage. The maximum number of e-transactions take place in urban areas. Data of rural area and urban area should be separated to exactly know whether the states are moving towards digitalisation or not,” he says.

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