Apple CEO Tim Cook speaks with Prime Minister Narendra Modi during his visit to India earlier this year. (Photo : YouTube/The Times of India)
Apple Inc CEO Tim Cook should be a happy man. While the company's iPhone patent is being challenged in China, India introduced new FDI rules clearing the decks for Apple to open retail stores in the country.
India on Monday announced that it is introducing a three-year relaxation on local sourcing rules with provision for an extension of up to five years if it is proved that products are "state of the art." Apple will be a major beneficiary of this new rule, hinting that Cook's recent visit to the country has not gone in vain.
The latest announcement is part of a comprehensive reform of rules on foreign direct investment (FDI), which has also opened up other sectors like the defense, civil aviation and pharmaceutical to total foreign ownership.
The new rules proposed by the Narendra Modi-led government grants foreign retailers a relaxation of three years from the obligation to source at least 30 percent of the goods sold in stores owned by the companies locally, Reuters reported. The new rules would enable Apple to set up its own shops in India.
While this puts an end to several months of uncertainty for the Cupertino tech titan that had first applied for store licenses in January. Now, Apple will be able to sell iPhones, iMacs and iPads through its own stores instead of depending on resellers.
Earlier, Apple had tried to by-pass the sourcing rules by citing a clause that gave flexibility to "cutting-edge" technology retailers from the requirements. Nevertheless, some government officials were equivocated over whether the products of Apple met that criterion.
Currently, India is the fastest growing smartphone market in the world with the sales predicted to increase over 25 percent this year. Apple, which enjoys just two percent smartphone market share in India, will be able to gain a larger share, thanks to the new rules.
The timing of the introduction of new rules by India is very crucial considering that Apple's market growth in the United States as well as China, which is its second largest market outside the U.S., has been sluggish.
The new rules will help Apple to resubmit its application and set up its retail stores in India soon. At the same time, the Cupertino tech firm can also ask for an additional exemption for five years if it is able to convince the government that its products meet the "cutting-edge" criteria, Fortune reported.
According to analysts, paving the way for opening Apple retail stores could also encourage Apple to see India as a favorable manufacturing destination. In fact, India has been lobbying with Apple as well as its partner Foxconn to start manufacturing in the country to create more jobs.
Watch "India eases foreign direct investment (FDI) norms to promote employment" below:
