Rules eased, but India isn’t a low-hanging fruit for Apple

Rules eased, but India isn’t a low-hanging fruit for Apple”

In its bid to push investments and revive growth, the Union Cabinet on Wednesday eased FDI or foreign direct investment norms in four sectors.

"We are delighted! H&M has been sourcing from India since the last 30 years for its worldwide markets, its great to see global sourcing is now part of the 30 percent local sourcing norms". Until now, while 100% FDI was allowed in single brand retail, there were several riders that came with it, including mandatory 30% local sourcing of raw materials.

That means the companies aren't obliged to follow the rule that allowed brands to sell via their owns stores only if they source 30 percent of their hardware components locally. This made it hard for several foreign brands, especially Apple, to set up a direct retail presence in India.

"Apple is a platinum standard brand and its brick-and-mortar stores are its monuments".

Moreover, allowing single-brand retailers to start online stores, while meeting local sourcing norms would give them time to build their brick-and-mortar presence in parallel. Plus, the government is considering removing the clause that counts export towards local sourcing for only the first five years.

"It has been decided that all procurements made from India by the SBRT entity for that single brand shall be counted towards local sourcing, irrespective of whether the goods procured are sold in India or exported". So that's a big development for a SBRT who are not present in the Indian market.

Companies are now also allowed to open online retail shops before starting up physical stores.

The new norms could be especially beneficial to the country at a time when the US-China trade dispute is heating up.

It said it will take some time, but it looks forward to welcoming customers to India's first Apple Store. In fact, Apple has already started exporting from India to Europe, which helps it conform to the new local sourcing rules needed to set up its flagship retail stores.

"This will help new entrants in particular to initiate their business through the online channel especially since the infrastructure to support online retail is quite well developed now", Pinakiranjan Mishra, Partner and Leader, Consumer Products and Retail, EY India, said. Analysts say the relaxation of FDI norms is a positive move for global giants such as Apple and IKEA, which are likely to find India a more lucrative market. "It's great to see global sourcing is now part of the 30% local sourcing norms". "We see this supporting the ease of doing business in India and driving in larger investments from global companies".

According to announcements by Commerce and Industry Minister Piyush Goyal the rules for overseas single-brand retailers have been relaxed, taking into consideration their long-standing demands.

Apple's India journey though has been bumpy so far, with its market share now hanging around 1% by volume and 3% by value, due mainly to a lack of demand for its expensive phones in a price-sensitive market flooded with affordable high-spec devices of Chinese players such as Xiaomi and OnePlus.

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