Weakening Indian rupee may hurt mobile handset makers

The currency has taken a tumble in the past few months against the U.S. dollar. This could hurt mobile handset makers who already have small margins and rely on volume sales in India.
Written by Nitin Puri, Contributor on

I still remember when I first arrived in India in March 2009, the exchange rate was approximately 40 rupees to US$1. Fast forward four years later, now it's 58 rupees against US$1. In the short term, while this may be one of the best times for foreigners to visit India as their home currency goes a longer way, this could be the start of bad news for handset makers.

Indian consumers could get less bang for their buck if rupee weakens further.

According to TechGig.com, the depreciation of the rupee could in fact lead to a rise in input costs for manufacturers in India. Consequently, both revenues and profit margins will be eroded, and possibly lead to price hikes, if the situation persists.

So what does this mean for the average consumer?

In the short term, nothing too drastic as leading mobile makers such as Samsung and now Nokia are currently engaged in offering free devices for zero down payment and low Equated Monthly Installments (EMI), pending approval from banks and creditors. If anything, this might be the preferred route for consumers to purchase new handsets, as prices for mid range and high end devices are comparable to those in the West.

Looking at this scenario further, it's probable that Indian brands such as Karbon, Micromax, and even Onida could end up passing price hikes on to consumers, and to begin with, these are the middle to low tier devices available in India. However, they would have a direct advantage against all the entrants from China due to import duties and tariffs.

In the long run, perhaps Indian consumers will change their love affair with mobile devices and replace them every 1 to 2 years, as required, instead of the more frequent 6 to 12 months as is the norm.

Irrespective of personal disposable income, Indian consumers love to have the latest and greatest mobile devices and will save up months just to get their hands on the latest device. Hence, the purchasing power and behavior of Indian consumers when it comes to mobile devices could potentially offset any potential losses incurred by the mobile handset makers.

In that aspect, perhaps Samsung and Nokia have the lead by offering free devices as mentioned earlier. If others follow suit, even more Indian consumers will have their hands on newer devices, thus securing both revenues and profits for the mobile handset makers.

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