Govt urges Indian firms to make sub-Rs2,000 smartphones

The government has asked Indian smartphone makers Karbonn, Intex, Micromax and Lava to come up with smartphone models that cost less than Rs2,000, according to a report in the Economic Times. The request was made in a meeting attended by representatives of the companies. No such demand has been made to Chinese smartphone makers, while North Korea's Samsung and US-based Apple were not at the meeting.

The government wants a sub-Rs2,000 smartphone to give a push to the 'less cash' economy, and enable more Indians to afford a smartphone that can make digital transactions. In the meeting held at Niti Aayog, the smartphone manufacturers were told to include QR code scanning capabilities, and a biometric security through a fingerprint scanner, in the sub Rs2,000 handsets. The government will not be subsidising the phones.

A sub-Rs2,000 smartphone is exactly the price point that Google chief executive Sundar Pichai suggested for boosting mobile penetration in India. Pichai made the suggestion at a meeting with students of the Indian Institute of Technology-Kharagpur, from where he had passed out 23 years ago.

Google's Android One programme is an effort to make low cost smartphones for emerging economies such as India. Currently the cheapest Android One smartphone available in India costs Rs6,000.

Most of the smartphones sold in India are in the sub-Rs5,000 category, and are usually paid for in cash. Currently, the cheapest 3G smartphones in the market start at around 2,500, with 4G handsets starting at a higher price point. Even in 2016, Indians continued to buy more feature phones than smartphones. In a population of 1.3 billion people, only 300 million people use smartphones in India.

Manufacturing is finely tuned to the demand, and following the demonetisation of high value currency notes, there has been a cash crunch. Sales of smartphones have seen a slowdown. Foxconn factories in India that make phones for many companies have halted production lines and sent its workers on forced vacations. Four plants at Sri City, Andhra Pradesh are running at half their capacity. Some manufactures have indicated that they may need to permanently lay off workers.

Foxconn makes devices for the four companies present at the meeting – Lava, Intex, Karbonn and Micromax.

The impact of demonetisation on the manufacturing sector is expected to continue for another three or four months. The industry will have to change the way it manufactures and stocks smartphones, to achieve the volumes envisioned by the government. The volumes require high investments from the companies, and a pile up of inventory as against demand based production.

There is already a pile up of unsold smartphone inventory following the demonetisation. Based on requests by the industry, the government has extended the deadline for the compulsory implementation of the panic button. Micromax, one of the top smartphone sellers in the country saw a 25 to 30 percent drop in sales volume following demonetisation.

The government has launched several technology platforms to enable cashless transactions. Unstructured Supplementary Service Data (USSD) and Unified Payment Interface (UPI) and mobile wallets are some of the modes for cashless transactions in India. NPCI recently launched the UPI based Bhim app for enabling cashless transactions, that industry stakeholders called a game changer.

However, the use of these facilities for transferring money requires a smartphone. The reach of mobile banking will be limited if most of the population does not have access to smartphones.

The Aadhaar Payment App is a back end application that allows consumers to make cashless payments to merchants without the use of a smartphone. An Aadhaar linked bank account is required for the transaction, which is authenticated through a fingerprint scanner at the merchant's location. The merchant requires a smartphone though, and the app has been first implemented by IDFC bank.

Feature phone users can also make UPI based cashless transactions by dialling *99# on their mobile phones. The service is called National Unified USSD Platform (NUUP). The service is available in eleven local languages, while the Bhim app supports on English and Hindi as of now. The service works on Windows Mobile and iOS devices as well, mobile platforms where the Bhim app has not yet been released.