Trying very hard to not rock the boat translates into making at least one or two boo-boos along the way. In his bid to widen the tax net by targeting affluent individuals, Finance Minister P. Chidambaram has unwittingly hit the middle class the hardest with the increase in excise duty on mobile phones.
Ironically, the affluent will escape unscathed. Individuals looking to buy the flagship models, the iPhones, Galaxies and Lumias, will still purchase without worry. An extra thousand or two thousand rupees shouldn’t make too much of a difference.
Where the hammer will fall the hardest, however, is on the low-cost feature phone segment— a segment that has been created entirely by the middle-class looking to get the absolute best bang for the buck. Bear in mind, these phones (the Ashas, Micromaxs, Lavas) are looked at with an almost shrew-like mentality. The typical range is from Rs. 6,000 to Rs. 12,000, wherein the price tags, even decimal points matter.
According to the Indian Cellular Association, a typical 3G phone that comes at a price of Rs. 8,000 would cost around Rs. 400-500 more. So, where does the customer turn to in troubled times? An altogether different type of market – one the average Indian needs no introduction to— one that has a grey tinge.
The absence of a carrier-bundled system, that subsidises the cost of the handset, has made it such that phones sold in India are already more expensive than those their American counterparts. A further hike will only result in a red carpet being laid out for the grey market to make deep inroads into the system.
What is further contradictory, however, is how this move negates the Government’s goal of connecting its citizens to the Internet. Indeed, a free Wi-Fi system on select trains was proposed just days ago in the Railway Budget. How does reducing the ability to purchase Internet-accessing devices gel with the aims of the National Telecom Policy? Nevertheless, the bottom line is that mid-range mobile phones need to stop being categorized as luxury items. Its economic-booster effect alone disqualifies such labelling. In the meanwhile, the outlook brightens for the grey market.
This article has been corrected for an editing error.