The prevalence of smartphones in poor countries is proposed to be supported by subsidies

The inaccessibility of smartphones is one of the barriers to the use of the Internet in developing countries, and therefore to the benefits of digitalization. In the work of Bank for International Settlements economist Vatsal Sriti, the authorities (using the example of India) propose reducing the value added tax for manufacturers or providing targeted government subsidies for their purchase for everyone or only for citizens with low incomes to increase the market for budget smartphones.

The smartphone is the key device enabling people in developing countries to benefit from digitalization as more and more services move online, Bank for International Settlements economist Vatsala Sriti said in Tracking Digital Adoption. The work was based on data from the mobile phone market in India (the second largest market for telecommunications and Internet services in the world). The researcher concludes that the most important factors driving smartphone adoption are changes in income distribution and improvements in device quality (without the latter factor, market size would have declined by an average of 35%).

To increase the spread of gadgets, it is proposed to reduce the value added tax (using the example of India – from 18% to 3%) for manufacturers of budget smartphones (costing up to $200), as well as providing subsidies from the state for their purchase for everyone (in the amount of $7) or only for citizens with low incomes ($10). Any of these measures, according to expert calculations, can lead to a similar result and growth of the smartphone market by 10%. At the same time, a targeted subsidy, in his opinion, can provide the greatest redistribution effect.

The researcher notes that in 2018, the Indian state of Chhattisgarh launched a program to provide free devices to low-income women in the village. However, after the change of state government, it ceased to operate and, in fact, recently the policy of the Indian authorities has gone in the opposite direction: in 2020, the value added tax on mobile phones was increased from 12% to 18%, which led to an increase in prices for them.

Note that for Russia the problem of access to smartphones is not as pressing as in developing countries like India. The number of mobile Internet subscribers in the Russian Federation increased from 109.9 million in 2015 to 164.2 million in 2022, and the number of subscriber devices for “mobile radiotelephone communications” during the same time – from 284 million to 315 million, according to data from the Institute of Statistical Research and Economics of Knowledge, National Research University Higher School of Economics. According to Deputy Prime Minister Dmitry Chernyshenko, the share of mass socially significant services online reached 100% at the end of 2023 (with a plan of 85%), 110 million people have verified accounts and actively use the State Services portal.

Venera Petrova