Apple has had a strong focus on the Indian market as of late; going as far as to set up development facilities in the country. However, it still faces a stumbling block when it comes to actually opening its own retail stores; mostly coming from some poorly defined legislation.
India has a protectionist government that imposes additional rules on foreign companies that want to invest more than 51-percent in a retail store. These companies are required to source at least 30-percent of their finished product from from micro, small and medium enterprises, village and cottage industries, artisans, and craftsmen.
The rule was slightly relaxed last year when it was ruled that companies bringing “cutting-edge technology” would be exempt – since it would be impossible to source the required components from cottage industries. However, the government failed to actually define what constitutes cutting-edge technology. This has lead to each stage of application process applying its own standards to the process.
Apple has learnt this the hard way, as its application to open retail stores became stuck at the final stage. A special panel comprising officials from the Departments of Industrial Policy and Promotion (DIPP), Electronics and IT, and NITI Aayog had recommended to the finance ministry that it should allow the application to waive the 30-percent requirement.
However, the Foreign Investment Promotion Board (FIPB) which works under the finance ministry decided that Apple does not selling cutting-edge technology – which means that it is still held to the 30-percent rule. It also said that there are no clear guidelines to decide on what constitutes “cutting-edge”.
The reasoning behind the FIPB’s ruling is quite reasonable. The Board believes that allowing Apple to be exempt would open the floodgates to other electronics manufacturers like Xiaomi and LeCo (both of which have also applied for the same waiver). After all, the technology in other smartphones isn’t too different from that in an iPhone.
Apple views India as its next big market, as sales in both the US and China begin to slow. iPhone profits were propped up by the South Asian country last year, and Cupertino know that it will need to crack the Indian market if it wants to maintain its record breaking profits.