Some time this month, over 300 households in Delhi, Lucknow and the National Capital Region will get their first PCs. Over the next nine months, they will partner Microsoft and HCL in an exercise to evaluate the former's Vista Starter Edition Operating System, a low-cost OS that is part of the company's initiative to bridge the digital divide. For the record, none of the households will pay the market rate for the PCs; they will get them at a discount of 70 per cent (since one criteria for selecting households is that they should boast monthly incomes less than Rs 20,000, and another, that they should have at least one child who goes to school or college, this is, to resort to a phrase popular with Indian marketers and customers alike, 'value for money').

Put that down as one more effort by companies in the connectivity business-think pc makers, software firms, handset manufacturers, and telcos -to make a market out of small-city, big-town, small-town, even rural India, an effort that spans everything from Rs 200 pre-paid recharge coupons and Rs 999 life-time connections for mobile phones to sub-Rs 10,000 PCs and frills-free software. The list would also include hi-tech novelties such as the gesture keyboard that Hewlett Packard recently unveiled; this is essentially a pen-based technology that allows users to communicate with their computers using the Devanagiri and Kannada scripts (Tamil is work in progress).

If companies such as Microsoft, HP, HCL, Acer, Nokia, Bharti Tele-Ventures, Reliance Infocomm, Motorola and the like are burning time and money on such initiatives, blame it on the numbers. In 2005, the mobile telephony base grew by 38 per cent in the metros, 120.6 per cent (on a small base) in C Circles, and 67 per cent (on a large base) in B Circles. And, according to data from the Manufacturers Association of Information Technology, in the first half of 2005-06, sales of PCs outside the top eight metros accounted for 55 per cent of all PCs sold, up from 35 per cent for the comparable period in 2002-03.

"We believe there is a strong market in these towns and that purchasing power hasn't been exploited enough," says S. Rajendran, Head (Sales and Marketing), Acer India, which has drawn up plans of selling in 100 towns in the country and launched a Rs 13,000-pc for the purpose. "The next wave of growth is going to come from B and C circles," adds Manoj Kohli, President, Bharti Tele-Ventures. "The potential in these towns is very big as (mobile telephony) penetration in them is still very low," says Vikram Mehmi, CEO, Idea Cellular. And although almost all of India's 930,000 broadband connections at the end of 2005 were in the top eight cities in the country, a bundled pc-telephone-broadband package could make all the difference. With declining prices of all three components, today, such a package could cost what its most expensive constituent, a pc, did six months ago. Price elasticity should take care of the rest.

-Shaleen Agrawal & Rahul Sachitanand

INSTAN TIP
The fortnight's burning question.

Q. Will we see double digit GDP growth in 2006-07?

No. Sunil Duggal, CEO, Dabur India

I don't think so. It will still hover around 8 per cent. The current policy environment is not conducive to heavy influx of foreign direct investment and that's a must for growth to be 10 per cent plus.

No. T.K. Bhaumik, Chief Economist, Reliance Industries

It is still early to predict agricultural growth. Better rainfall may improve growth, but even then it will not clock 10 per cent. For that, the industrial sector should grow more and incidence of taxation on consumers should be decreased.

No. S.C. Gupta, Chairman and Managing Director, Punjab National Bank

It is certainly achievable in the next 3-4 years. Infrastructure is one of the key areas which deserves more than ordinary attention for a double-digit growth. For 2006-07, even a 7.5-8.0 per cent growth rate would be excellent.

--Compiled by Shalini S. Dagar

Q&A
Jeannot Krecke: Not Anti-Mittal

Luxembourg's minister of Economy and Foreign Trade and Sports Jeannot Krecke was in Delhi recently to discuss a double tax avoidance agreement with India. He ran smack into a barrage of questions on the country's opposition to Mittal Steel's bid for Arcelor in which it owns a 5.6 per cent stake. Earlier, Luxembourg's parliament had agreed to incorporate a clause about a bidder having to wait for a year to make a fresh bid for a company (from the date its previous offer fails or is withdrawn) and not entirely rejected another proposal that requires full cash payment if less than 25 per cent of the bidders shares are not liquid (only 12 per cent of Mittal Steel's is). The parliament will vote on the new takeover law sometime in April.

How was your interaction with the government?

The overall issue is the double tax avoidance agreement that we are looking forward to. I think it will be concluded now.

There is talk of Indian government taking measures against Luxembourg.

The Indian government has the option of giving its agreement (consent) to this treaty or not.

There have been reports here that your new takeover law is anti-Mittal?

It was an EU directive of 2004 to have the law in place within two years. This is not related to Mittal Steel's bid.

Your new takeover law will be ready beginning April 2006? It's also being stated that it is in Mittal Steel's interest to wait for the new law because currently there is no legal framework available for takeover activities.

Yes.

There's a perception in India that Luxembourg doesn't like the idea of an Indian taking over its largest company.

There is no element related to nationality or racism when it comes to decision at the level of business.

-Kumarkaushalam