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Why Apple Is Finding It Hard To Open Stores In India

Posted by Shikha Sharma in News, Sci-Tech
December 8, 2016

At its annual earnings conference held in July this year, Apple CEO Tim Cook called India one of its ‘fastest growing markets’ confirming the company was looking forward to opening retail stores in India. Six months later, the tech giant is yet to open a single store. Reason? The government is yet to grant the company the necessary waivers to permit it to own, operate and sell non-indigenous products at stores in India.

Unlike other countries, Apple does not have its own shops in India as Indian law had stringent rules about FDI in single brand retail. Instead, it operates in a franchise way in the country by partnering with a major retailer of Indian origin.

In June this year though, the Indian government relaxed its Foreign Direct Investment (FDI) norms and exempted foreign players in single-brand retail from a requirement to source 30% of goods from local sources for three years. It also allowed a five-year relaxation to retailers using ‘state-of-the-art’ and cutting edge technology.

WASHINGTON, DC - MAY 21:  Apple CEO Timothy Cook testifies before the Senate Homeland Security and Governmental Affairs Committee's Investigations Subcommittee about the company's offshore profit shifting and tax avoidance in the Dirksen Senate Office Building on Capitol Hill May 21, 2013 in Washington, DC. A Congressional report released yesterday said that Apple, America's most profitable technology company, used a complex system of international subsidiaries and tax avoidance efforts to shift at least $74 billion out of the reach of the Internal Revenue Service between 2009 and 2012.  (Photo by Chip Somodevilla/Getty Images)
Photo by Chip Somodevilla/Getty Images

The move was widely expected to benefit Apple and enable it to open its first stores in India.

Apple had sought to sidestep the sourcing rules saying it was a retailer of cutting edge’ technology, but its application did not find favour with a finance ministry department which hesitated to take a call on whether Apple products met that criteria.

In August, Union Finance Minister Arun Jaitley reportedly ratified a proposal that gave the information technology ministry the power to label a retailer of a single brand as a provider of cutting-edge technology. The classification could give Apple a three-year exemption from sourcing the components locally.

Apple is learnt to have re-submitted its application and its officials have been holding meetings with the government to discuss ways to take forward its plans & seek clarity on the exemption.

India is the world’s fastest growing large smartphone market with sales expected to rise over 25 percent this year, and Apple which just has 2% in the market sphere wants a bigger piece of the market.

The government is yet to take a final call, but by relaxing local sourcing norms, the government has given an in-principle nod of sorts to the giant to open its retail stores in the country.

In return, it hopes that Apple looks favourable towards India as a manufacturing destination, as part of Prime Minister Narendra Modi’s plan to bring foreign direct investment to India.