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Cashless India: Advantage Telecom Companies

Photo: The Indian Express

The NDA government at the centre is taking lot of measures to make a 86% cash economy into cashless. But the things should have been done slowly, due to India's structural problems.

Anyway, it is important to mention here that, India has among the highest usage of cash across global economies. According to a 2015 report from PwC, 98% of all transactions by volume happen in cash. 68% of the total value of transactions are conducted in cash.

Admittedly, high cash usage often comes with a cost. In 2013, research firm McKinsey found a strong correlation between high cash usage and the size of a country’s shadow economy. 

The size of India’s own shadow economy — which includes black market transactions and undeclared work—is roughly a quarter the size of gross domestic product (GDP).

Indeed, India suffers from a serious rash of corruption, which hurts honest, hardworking families. According to Transparency International, the South Asian country ranks 76 out of 168 countries in its 2015 Corruption Perceptions Index. 

In May, Indian government data showed that a scant 1% of Indians pay income taxes. Cashless India is an answer to most of these kinds of problems.

Now, in one of his speeches, the PM, Narendra Modi, has spoken of using the mobile phones as banks and as a device which will promote the cause of cashless India. He gave a clarion call to use the smart phones, as a part of everyday transactions and plus the loop holes, which gives more muscles to a parallel economy.

This gives some legs to the Indian telecom companies to increase their businesses, as more and more people use smart phones and internet, to do their necessary transaction; without any physical transfer of Cash, lowering the cost of printing of new currency.

Already, I am  told that Airtel has come up, with a Bank whose services can be used for a number of purposes, apart from making an user a permanent customer.

Now, more use of telecom services means more number of towers and fibre cables needed for the installation and execution of the same. This is therefore, a very good news for both the tower and wireless telecom companies.

In such a scenario, I would suggest you to slowly accumulate the shares of telecom companies which are now trading near their 52 - week low prices. Top picks:

1. Bharti Airtel Ltd: Rs.324.90.
2. Bharti Infratel Ltd: Rs.393.65

3. Reliance Communications Ltd: Rs.35.90

4. Idea Cellular Ltd: Rs.73.35.

It is to be noted that, I have recommended all these stocks yesterday in Facebook.