India said to require local sourcing by Apple to open stores

New Delhi: India’s finance minister has ratified a decision that Apple must meet local sourcing rules to open its own stores, according to people familiar with the matter, dealing what may be a fatal blow to the iPhone maker’s effort to open retail outlets in the country.
Minister Arun Jaitley decided to support the decision by India’s Foreign Investment Promotion Board (FIPB) that Apple will have to procure 30 per cent of components locally if it wants to sell through its own retail stores, said the people, asking not to be identified because the matter is private. The company makes most of its products in China and doesn’t currently meet that criteria.
Apple Chief Executive Officer Tim Cook went to India last week for the first time as he seeks to capitalise on the market’s prospects and revive his company’s growth. India has become the world’s fastest-growing smartphone market, with a billion devices forecast to be sold over the next five years. Apple has little market share in the country now, as consumers opt for less expensive devices from rivals such as Samsung Electronics and Micromax Informatics.
India requires that companies make products in the country as part of its industrial policy, aimed at reaping the economic benefits that come from manufacturing facilities and jobs. It doesn’t want technology companies to sell products and take advantage of its vast consumer base without making their own capital investments.
The Finance Minister’s decision could still be overturned, but that may require intervention from Prime Minister Narendra Modi.
India can provide waivers to the manufacturing rules for cutting-edge technology companies. But the FIPB decided it can’t certify Apple for that exception, people familiar with the matter said. Apple currently sells its iPhones and iPads through franchisees as well as the retail units of India’s biggest conglomerates.
Finance Ministry spokesman D.S. Malik couldn’t immediately be reached for comment. Apple India didn’t immediately respond to an e-mail seeking comment.