What do Indian phone brands (Karbonn, Micromax, Lava, Spice etc) need to do to improve their smartphones?

As the phone market in India moves across to the Android smartphones, there is significant opportunity for local Indian brands to offer cheap, yet functional and high quality smartphones. However with a history of limited innovations, these companies are facing challenges in getting customer acceptance. What can they do to differentiate their products that are clearly sourced from same/similar ODMs in China.

Smartphones can be differentiated on following levels. each has its own share of challenges.
 

Stack Level: Fork your own version of android. Introduce new technical capability. Like introducing NFC, Processor technologies, Network etc. Its a technology bets and payout over years if not in decades. It require a deep pocket for upfront investment and domain knowledge. One need do it over multiple cycle of tech and moore's law. Face global competition in product / technologies and not to mention patents. This is not something any Indian OEM can do in current state of market. On global scale also very few guys are doing it.

UI Level (skin / overlay theme): Like HTC Sense, Samsung Touch Wiz and other such skins. They can invest in making their own skin which is little more suited for Indian need but honestly this has a limited appeal which end customer can see only when they use it. There is lack of design skill which can compete with global best. One thing need to know here is that In recent APPL - Samsung case most patent samsung was defending was not for stack but for touch whiz UI. so many OEMs are sticking to Stock android experience only. But above all I am not sure how much importance user would give this component during purchase decision. This can be a short lived advantage at best.

Application Level: Give pre bundled apps to user. Angry bird, Fruit Ninja. I have a hunch that OEMs can command a premium of 1000 on every unit if they promise that for next one year they pick up top ten most popular paid apps every quarter offer them free of cost to user. If you look at pirated apps.. you know that their is a market demand. This can be a diffrentiator for them but again it will be copied to death in six months so it will be a short lived one only.
Micromax announces 10,000 local language apps for users










Operator subsidy: Like USA they can subsidized cost of phone via operator data plan bundling. This has its share off difficulties but can be a killer move if someone has resources to pull this off. I think this business model is already happening.





 Cloud Level: This is a surprisingly unexplored area. Right now we have low cost feature phone in 5-6 K INR range the way cost are coming down we should have high end smartphone in this price bracket in few years. The way to make sure that your existing user stay with you when that happen is to lock them in cloud. ie offer a free cloud app  offering  (email , photo, calendar, storage, music) with your low end phone. Take it good. Ensure that they have your email service as their primary email id (no big deal since first time internet user are always locked in default offering . This is how Internet Explorer  and Google rose to dominance via AOL during first wave of internet). Unless, you are a exceptionally lousy brand chance are that once masses will  make switch to smartphone it will be a natural choice for them to stay with your brand. Its has a good chance of working out well.

Branding: Might work but you are up against MNC with Multi-million dollar budget and they don't even design advertisement for India market they simply use same advertisement everywhere (thanks to their global foot print). Most Indian brand cant invest that much not on sustained basis. On top of that we are a aspirational society. Everything with a foreign stamp has a vanity value for us. In that sense Indian Brand start from a position for weakness. Someone need to be super creative to find their way around it.