Cheap phone a disaster for ′Make in India′ | Business| Economy and finance news from a German perspective | DW | 23.02.2016
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Cheap phone a disaster for 'Make in India'

The recently unveiled Indian smartphone Freedom 251 was billed as "the world's cheapest," bringing high-tech to the masses. It now seems the $3-handset has never existed, making India look foolish across the world.

A controvery has erupted over the "Freedom 251" smartphone, which was launched by Ringing Bells, a hitherto unknown Indian telecom firm, on Wednesday (17.02.2016).

At the end of last week, the company's website crashed, orders could not be placed and tech reporters claimed the phone was not made in India, but in China. Kirit Somaiya, a Member of Parliament, questioned the phone company's credentials, telling reporters: "This is a Ponzi bogus company scam."

The disaster of the launch casts the government's "Make in India" campaign in a bad light. Narendra Modi launched this initiative just four months after he had taken office as India's prime minister in May 2014, to attract foreign direct investment and encourage companies to make their products in India.

The government, led by Modi's hindu nationalist BJP party, has since launched other initiatives such as "Digital India" and "Skill India", to boost digital services and skills in the country.

High hopes

It was in this context that the "Freedom 251", billed as "the world's cheapest smartphone", was presented during a lush ceremony in Delhi. A leading BJP party member, MP Murli Manohar Joshi, presided over the event (picture above, right).

The price tag of just 251 rupees (3.3 euros, $3.6) grabbed international headlines. With good technical specs and an up-to-date Android operating system, the phone promised to fulfill all the government's campaigns: even the poor could now have access to digital services and develop their skills, and the phone would be made in India.

Make in India logo

With his "Make in India" campaign, Prime Minister Narendra Modi is hoping to lure foreign industries to his country

No experience

Production was scheduled to start in two plants in Noida and Uttaranchal, with a targeted capacity of 500.000 units per months, said Ashok Chadha, president of Ringing Bells, a company which has never made a phone before, and was only founded in September 2015. Over time, Ringing Bells would set up a total of five manufacturing centers in India, he claimed.

Chadha also said there were no government subsidies involved in producing the phone, according to Indian media reports. Apparently, the company calculated to make a profit by using economies of scale, online marketing, local assembly, and by setting up an e-commerce platform.

Phones ordered online between February 18-21 were supposed to be delivered by June 30 at the latest. But Ringing Bells' website was down for much of that period, and it remains unclear how many orders were actually placed. Customer response "far exceeds the number that we had expected," the company states on its website, adding that "we may not have been able to meet the needs of all". Booking is now closed.

Made in China

Even worse for Ringing Bells' image: The early handsets given to reporters for review turned out to be not made in India at all, but re-branded versions of a cheap Chinese phone, the Adcom Ikon 4.

"It has a partially-erased Adcom logo on the front that the company shoddily attempted to mask with whitener," the website IBNLive reported. "Even the Adcom logo on the back cover has been scratched off and a flag of India painted atop."

Ringing Bells president Chadha clarified this phone was "not the final piece," saying the company "wanted to show a sample or prototype of what the handsets will look like."

Growing concerns

Even so, it remains a mystery how the low price tag of just 251 rupees could be reached, since the Adcom Ikon 4 sells for around 4,000 rupees in India.

Even the country's mobile industry body, Indian Cellular Association (ICA), expressed doubt about Ringing Bells' pricing. In a letter to Telecom Minister Ravi Shankar Prasad, the ICA estimated the lowest possible retail price for a product like this to be at least 4,100 rupees.

"We are bringing this to your kind notice," the letter said, "so that a scenario does not arise in the future, where the nation, the government of India, industry and trade are seen in a poor light."

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