Budget 2013-14: Smartphone price rise may hurt adoption

by Sohini Bagchi    Mar 01, 2013


Enterprise adoption of smartphones has grown dramatically in India in recent months. Considered to be a key factor in driving enterprise mobility, smartphone sales and adoption is also expected to grow phenomenally in the country over the next one year. However in the recent Union Budget 2013-2014, finance minister P Chidambaram’s proposed hike in the price of smartphones did raise quite a few eyebrows in the industry.

Chidambaram proposed a hike of 6 per cent in the excise duty on the handsets priced more than Rs. 2,000. Earlier, the government levied only 1 per cent of excise duty on mobile phones. Ironically almost every smartphone available in the market, even a basic model, costs not less than Rs 4000-5000. The high end smartphones cost anywhere between Rs 25,000 and Rs 50,000.

Though the government believes that the increase in the excise duty on high end phones is done in good faith, Pankaj Mohindroo, President, Indian Cellular Association National told Economic Times that this will encourage the sale of unbranded and grey devices and discourage people from buying smartphones as any 3G phone costing Rs 10,000 say, will now cost Rs 400-to-500 more.

Sanchit Vir Gogia, IT Analyst, Consultant, Advisor, International Data Corporation (IDC) believes that this move may not spur domestic manufacturing of mobile handsets. However, it is unlikely to either displace the position of global brands that chiefly import handsets or force these brands to setup additional manufacturing units locally.

According to Suresh Vedula, Director - Enterprise Sales, Nokia India, “The proposed hike in the price of smartphones will not affect its adoption in the enterprise. “Enterprises will certainly not be perturbed by a marginal rise of 6 per cent. Though the jump from 1 per cent to 6 per cent is not very less, in the long run it would not affect their adoption.” Vedula adds that in their larger mobility strategy, enterprises are realizing the value mobile devices such as smartphones are bringing to their businesses. Therefore, investments in high end enterprise smartphones will continue to increase in the coming months.

In recent months, smartphones were getting popular among business users in India, with a lot of them planning to switch from the conventional feature phones to high-end mobile devices. recent study by Nielsen notes the country currently has 900 million mobile phones users out of which 40 million use smartphones, and the number of smartphone users was expected to rise phenomenally. Even before the Union Budget 2013-14, the Central government reported that special concession in terms of sales tax would be given to mobile and smart devices especially feature phones, smartphones and tablets, which would have resulted in 6-8 per cent reduction in prices of the mobile devices. However, this was not reflected in the budget and some even believe that smartphone adoption among small and emerging businesses could be slightly affected because of this rise in the price.