India is attempting to drive Chinese smartphone brands out of the Rs 12,000 phone market. India is attempting to push Chinese smartphone manufacturers out of the Rs 12,000 phone market.

To kick start its faltering domestic industry, India wants to prohibit Chinese smartphone makers from selling devices for less than 12,000 rupees ($150), a blow to brands such as Xiaomi Corp. According to people familiar with the matter, the move is intended to push Chinese conglomerates out of the lower segment of the world’s second-largest mobile market. It coincides with growing concern about high-volume brands such as Realme and Transmission undercutting local manufacturers, they said, declining to be identified because they were discussing a sensitive subject.

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Exclusion from India’s entry-level market would be detrimental to Xiaomi and its peers, who have increasingly relied on India to drive growth in recent years as their home market suffers from a series of Covid-19 lockdowns that have crippled consumption. According to market tracker Counterpoint, smartphones priced under $150 accounted for one-third of India’s sales volume for the quarter ending June 2022, with Chinese companies accounting for up to 80% of those shipments.

Xiaomi’s stock fell further in the final minutes of trading in Hong Kong on Monday. It fell 3.6 percent, bringing the year’s decline to more than 35 percent. According to the sources, it is unclear whether Prime Minister Narendra Modi’s government will announce any policies or use informal channels to express its preference for Chinese companies.

New Delhi has already subjected Chinese firms operating in the country, including Xiaomi and rivals Oppo and Vivo, to extensive financial scrutiny, leading to tax demands and money laundering allegations. Previously, the government used unofficial means to prohibit Huawei Technologies Co. and ZTE Corp. telecom equipment. While there is no official policy prohibiting wireless carriers from purchasing Chinese networking equipment, they are encouraged to do so.

Apple Inc. and Samsung Electronics Co., which charge higher prices for their phones, should be unaffected by the move. Requests for comment from Xiaomi, Realme, and Transsion went unanswered. Representatives from India’s technology ministry did not respond to Bloomberg News inquiries.

In the summer of 2020, India increased pressure on Chinese firms after more than a dozen Indian soldiers were killed in a clash between the two nuclear-armed neighbours on a disputed Himalayan border. As relations between the two countries deteriorate, it has banned over 300 apps, including Tencent Holdings Ltd.’s WeChat and ByteDance Ltd.’s TikTok.

Before new entrants from the neighbouring country disrupted the market with low-cost, feature-rich devices, homegrown companies such as Lava and Micromax accounted for just under half of India’s smartphone sales.

Chinese smartphone manufacturers now sell the vast majority of devices in India, but their dominance is not based on “free and fair competition,” India’s junior technology minister told the Business Standard newspaper last week. Despite their dominant position, most Chinese handset makers in India report recurring annual losses, fueling accusations of unfair competition.