Ever since the government demonetized old Rs 500 and Rs 1,000 notes, there has been a big push for digital payments in the country. In its mission to build a ‘cashless economy’, the government has been encouraging mobile wallets, online and card-based payments among people and merchants. As expected, digital payment has seen a meteoric rise in adoption but it still remains beyond the reach of people in rural and remote areas of the country. One of the hurdles is the low penetration of smartphones or internet-enabled phones, which has resulted in low uptake of platforms like UPI or even private platforms like Paytm or Airtel Money. Narrowing down the problem, the cost of smartphones hasn’t come down to a price wherein they called ‘affordable’ for people in rural and remote areas of the country.
The government is now looking to address this problem by asking local handset players like Micromax, Lava, Intex and Karbonn to develop sub-Rs 2,000 smartphones with capabilities to “scan for Aadhaar-based financial transactions” and eventually carry out digital payments with ease, reports ET. “The government’s aim is to allow financial transactions from anywhere, devices which should also have the ability of scanning for Aadhaar-based financial transactions in the future,” ET quotes an industry executive as saying.
While the government aims to bring the majority of masses onboard to the digital economy, it doesn’t intend to subsidize the cost of smartphones. Instead, it wants the smartphone companies to come with solutions to bring down the prices. The publication further reports that the government intends to roll out 20-25 million units of such ultra low-cost smartphones.
Looking at the current market scenario, the government’s ambitious plans for under Rs 2,000 smartphones seems like a distant dream. At present, 3G smartphones are available in the market for around Rs 3,000, whereas 4G smartphones are relatively expensive, though the price gap between entry-level 3G and 4G smartphones is decreasing fast. But the government doesn’t intend to have just a 4G smartphone, but a phone with fingerprint scanner or iris scanner for biometric authentication along with high-quality processors and build quality. Right now, the cheapest smartphone with the fingerprint scanner is the Intex Cloud Scan FP, which is priced around Rs 3,700. Besides the fingerprint scanner, the smartphone has entry-level specifications like 1.2GHz Spreadtrum SC7731C SoC, 1GB of RAM and 5-inch FWVGA display. ALSO READ: BHIM app crosses 7 million downloads, 1 million transactions within first week of launch
“At this point it is not feasible for brands to make sub 30$ phone without incurring losses. As consumer will not buy phones for transactions purpose only, the expectation from smartphones are high. Massive shift in India is happening from feature phones to smartphones but that shift brings with itself a level of expectation- expectation of consuming content, expectation of watching videos and listening to music for longer time and hence need for better hardware features. To accommodate these features, Industry has reached a certain level of price point which is currently $50-$60,” Parv Sharma from Counterpoint Research told BGR India.
Moreover, the Indian handset players are already losing ground in the market to Chinese handset players like Xiaomi and Lenovo-Motorola. According to a recent IDC data, China-based smartphone makers, who drive sales primarily from the online marketplaces, accounted for more than 40 percent market share in the top 30 cities during the month of Diwali festival. With demonetization creating new challenges for these companies, another Counterpoint report has predicted a tough 2017 with some smartphone players exiting the market altogether. It’s highly unlikely that the smartphone players, especially the Indian companies, will be up for the government’s ambitious sub-Rs 2,000 smartphone plans, and risk piling up high volumes or have an advanced inventory. Interestingly, the government hasn’t reached out to Chinese companies, which currently dominate the budget smartphone segment in the country.
While an ultra low-cost smartphone may seem like the need of the hour, the government has previously attempted to pull off something similar in the past and failed. The previous UPA government had pushed for an ultra low-cost Aakash tablet for bridging the digital divide in the country. On a related note, Google’s Sundar Pichai, during his India visit, did say that the ideal price point for smartphones in the Indian market is $30, roughly Rs 2,000. He also said that Google was willing to make cheaper smartphones for the consumers in India.