Demand of mobile handsets in the country is expected to reach 350 million units per annum by 2020, says a study by industry body FICCI with market analyst firm Ernst and Young (E&Y).

"India is the world's second-largest telecom market after China, with the total wireless subscriber base crossing 850 million at the end of June, 2011. By 2020, the handset demand is projected to reach 350 million a year," the study said.

At present, Indian mobile handset market is estimated to be in around 130 million handsets per annum.

It added that 505 million handsets are estimated to be manufactured in India, during the same year.

The study has found that average selling price (ASP) of handsets in the country is estimated to increase to Rs 2,950 by 2020 as compared to Rs 2,300 in 2010.

"In India, handsets are categorised as high, medium, low, and ultra low cost ASP devices. The medium ASP segment is likely to be the fastest growing segment in terms of volume," Prashant Singhal, Telecom Industry Leader, E&Y, said.

He added that affordability of feature-rich handsets is also expected to be a key enabler of handset adoption.

The study sees untapped rural market to provide handset players the next phase of growth.

"The number of 3G subscribers expected to cross 300 million by 2020, fuelling the growth of 3G-enabled handsets. A favourable policy and regulatory initiative conducive for handset manufacturing in India is expected to drive sustainable growth in this segment," the statement said.

The study recommends that there is need to set up handset manufacturing cluster parks that would enable a sustainable ecosystem for the manufacture of mobile handsets in the country.

"A detailed component supply roadmap needs to be developed by starting to manufacture certain parts such as chip-sets, keyboard, plastic elements and battery," the statement said.

The study says that government should create a sizeable export promotion fund for the telecom equipment and services export and handset exports from India may be included in bilateral trade agreements with emerging markets in regions such as South Asia, Africa, Latin America, Russia and Eastern Europe.

The detailed study will be released by FICCI on Thursday.