The iPhone 4 officially landed in the 1.2 billion people market of India on May 27, beginning at 34,500  Indian rupees (about $760) for the 16GB version after a two-year service agreement. But pricing the phone at $760 (which also raised red flags with the government) meant putting the iconic product out of reach for the 41.6 percent of the total population that lives below the international poverty line of $1.25 a day.

No wonder Android is a big hit in India. Not for long, if Apple has any say over it. According to a local report, Apple’s pulling out its secret weapon – the cheaper, unlocked iPhone 3GS which is now being advertised by local carriers Airtel and Aircel. It ain’t gonna be cheap either – certainly not by the living standards of the 41.6 percent of impoverished population – but the upper-middle class could take the bait:

Apple has divulged plans to relaunch its iPhone 3GS, which was then only available through network operators like Vodafone and Airtel. The new unlocked version will come with 8GB internal storage at a very reasonable price of 19,990 Indian rupees (about $444). Apple’s latest iOS version 4.3 supports iPhone 3GS, making it a worthy opponent to similarly-priced Android devices with better hardware. Apple has also said that iOS 5 will work on iPhone 3GS though it is likely that not all features will be supported.

Despite Tim Cook’s insistence that iPhone is not for the rich, that has pretty much been the case thus far. And for all the talk about an inexpensive iPhone for the masses, Apple is still a high-end play. That strategy is hurting Apple in some key billion people markets where cheap Androids are catering to the vast majority of population with low income, including China and India.

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