Well, hind-sight is 20-20 but let me post-rationalize.

India's biggest problem is unofficial economy and low tax base, and is trying to expand tax base and trying to get more and more people into formal economy. Cryptocurrencies are not really tax-base expansion friendly even if regulated. So this makes sense from the point of view.

The interesting part here is Government of Andhra Pradesh is a member of Ethereum Enterprise Alliance, so now how are New Delhi and "Amaravati" going to deal with this situation would be interesting.