10/01/2017 10:03 AM IST | Updated 10/01/2017 10:59 AM IST

Government Wants Indian Phone Manufacturers To Sell Smartphones For Under ₹2,000

Cheap devices will enable larger population segment to go cashless.

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In the wake of the currency demonetisation, the government is pushing hard to scale up the digital payments ecosystem. In the latest step, the government has approached local smartphone manufacturers to produce smartphones costing under ₹2,000 in order to help the digital economy grow in rural areas.

According to a report in the Economic Times, the Niti Aayog -- Prime Minister Narendra Modi's substitute for the Planning Commission -- held a meeting with Indian smartphone makers Micromax, Lava, Intex and Karbonn to explore the possibility of producing low-cost smartphones.

Last year has been a rough one for local phone manufacturers such as Micromax, with declining sales and earnings. Should the government's initiative take off, smartphone manufacturers will be able to crack the vast untapped rural Indian market. Niti Ayog has not approached any foreign phone makers with this proposal, including giants such as Samsung or Lenovo.

Some weeks ago, Prime Minister Narendra Modi launched UPI-based BHIM (Bharat Interface for Money) app to make cashless transactions easy. Available only on Android currently, the app has already registered 10 million downloads. But the adoption for payment and the points where you can pay through the app are far and few.

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"The government's aim is to allow financial transactions from anywhere, devices which should also have the ability of scanning fingerprints for Aadhaar-based financial transactions in the future," an industry executive familiar with the matter told ET. Niti Aayog wants to float 20-25 million Aadhar-payment ready devices in the market in the first phase.

Producing a sub-₹2,000 smartphone will be a big challenge. In 2016, some purported smartphone manufacturers such as Ringing Bells of the Freedom 251 fame gained much publicity with claims of selling smartphones for as little as 251, but eventually turned to be duds.

The current crop of smartphones which are available in the market for around ₹3,000 have basic specifications whereas Niti Ayog is asking phone makers to include secure fingerprint sensor technology in the sub-₹2,000 phones. As of now, fingerprint sensors can be found only in smartphones that cost more than ₹10,000.

According to the data released by the Reserve Bank of India, 2 million UPI transactions were registered in December and, overall, there has been a 40 percent rise in electronic payments.