Apple Inc’s plan to set up wholly-owned retail stores in India has hit a roadblock as the company could not adequately substantiate the reasons for seeking a relaxation under the mandatory local sourcing applicable for foreign direct investment in single-brand retail.
The Foreign Investment Promotion Board (FIPB), which comes under the Ministry of Finance, has approved the company’s proposal but sans the exemption, a government official told The Indian Express. “There was not enough material on record to justify providing Apple the relaxation for local sourcing norms. They (Apple) had to provide enough material on record to justify the relaxation, which they couldn’t,” the official said.
The official added: “There are many companies involved in producing smartphones and tablets, which may ask for similar approval, but that cannot be done. iPad might have been termed cutting edge 7-8 years ago, but the same can’t be said now.”
Other companies such as Chinese smartphone makers Xiaomi and LeEco have also sought exemption from the local sourcing norms. A special three-member panel has been appointed within the Department of Industrial Policy and Promotion to consider these proposals, and had recommended that Apple be exempted from the sourcing guidelines.
Following a presentation by the Cupertino-based electronics manufacturer last month, a committee headed by the DIPP secretary had come to a conclusion that Apple’s products are indeed “cutting-edge” and had recommended that Apple should be given the exemption.
The panel comprised a member of the NITI Aayog and a representative of the administrative ministry, which in this case was the Department of Electronics and Information Technology.
Currently, the government allows 100 per cent foreign direct investment in single-brand retail trading, but requires the finance ministry’s approval if the proposed investment is over 49 per cent. The proposal first came for examination to the DIPP, which after examining and approving was sent to the FIPB wing of the Ministry of Finance. It is then forwarded to the finance minister for consent.
“All single brand retail FDI proposals have been cleared by the same process over last one year,” the official cited above said.
The decision of the FIPB comes only a few days after Apple’s chief executive officer Tim Cook visited India and met Prime Minister Narendra Modi to reportedly push the company’s plans of setting up single-brand stores in the country. India has proven to be the blue-eyed boy for Apple’s iPhone sales, which grew 56 per cent year-over-year in the country during the January-March quarter at a time when globally there was a 16 per cent fall in the number of iPhones sold.
At present, Apple does not have any wholly-owned store in India and sells products through distributors such as Redington and Ingram Micro.