Indian Government Approves 100% Foreign Direct Investment for Single-Brand Retail; Signaling a Major Win for Apple

The Union Cabinet today approved changes to the FDI norms for India. The government has eased norms across various key sectors at a meeting led by the PM Narendra Modi, such as construction, aviation, etc. However, the most notable and relevant change comes in the single-brand retail sector. The Indian Government has now approved 100% Foreign Direct Investment (FDI) for single-brand retail in India via the Automatic Route. Previously, it was possible to invest up to 49 percent via the automatic route — anything higher than 49 percent required a government approval.

The amendments announced today are “intended to liberalize and simplify the FDI policy so as to provide ease of doing business in the country”, said a release by the Press Information Bureau.

This change is a major win for Apple, who has been trying to setup their own stores in India for a while now. The company did get a step closer in their attempts in April of 2016, but the Indian government wasn’t ready to relax the local sourcing norms for Apple. However, in June that year, the government announced some radical changes to the FDI policy that raised our hopes yet again. Today’s announcements have hopefully brought Apple India a little closer to their goal.

The government has also decided to permit entities to “set off” the 30% local sourcing norms for the first five years, beginning 1st April of the year of opening the first store.

I have been waiting for a really long time to see company-run Apple Stores in India, not for the sales experience, but rather to experience Apple’s incredible support first-hand. It sure seems that the dream is closer to being a reality now.

Indian Govt. Won’t be Relaxing Local Sourcing Norms for Apple Stores in India

It looks like we’re back to square one with Apple and our hopes of seeing Apple Stores in India.

Just over six months after the Government of India announced FDI reforms and the possibility emerged for seeing Apple Stores in the country, the Govt. has now taken a sort of a U-turn about the whole thing.

ETtech’s Ruchika Chitravanshi & Deepshikha Sikarwar report that the government panel has decided not to relax the 30% local sourcing norms.

The US company’s proposal to set up Apple Stores under the single brand policy has been approved without any relaxation in the sourcing conditions, two officials privy to the development said. Apple can set up single-brand retail stores in India but it will have to meet the 30% local content sourcing requirement, they said.

“Apple’s proposal is acceptable to us but we cannot make an exception for it and forego the sourcing requirement if it wants to set up its own stores here,” a senior government official said.

sigh

Tim Cook just wrapped up almost a week-long visit to India, where he spent time in Mumbai & Hyderabad, and also met the Prime Minister of India Narendra Modi and discussed plans to sell refurbished iPhones as well as the possibility to manufacture phones in the country, as part of Modi’s ‘Make in India‘ initiative.

However, looking at today’s development, it seems like Apple’s got a rocky road ahead.

If you’ve been waiting for Apple to open their own stores in India, your wait might have just gotten shorter, according to The Times of India:

On Tuesday, the iPhone and iPad maker made a presentation before a committee headed by industrial policy and promotion secretary Ramesh Abhishek where it made a case for use of the special provision. Sources told TOI that Apple was a fit case for relaxing the norms. “Their products certainly meet the requirement for waiving the local sourcing clause,” said a source, adding that a final decision will be announced in a few days.

There have been reports that the Indian government was considering relaxing Foreign Direct Investment (FDI) since November last year, which were quickly followed by the government’s official announcement later that week. Following that, Apple had submitted their request for approval in January this year, but had to re-submit because “certain gaps [were] found in the initial proposal”.

After Tuesday’s presentation, I don’t think an announcement is all that far away.

Apple Stores in India May Be Possible Now

Just last week, I linked to an Economic Times report that claimed that the Indian Government was planning to relax Foreign Direct Investment (FDI) rules relating to compulsory local outsourcing. In case of Apple, the rules meant that they’d have to source at least 30% of the raw material from India for their products if they planned to invest in opening Apple Stores in the country.

Today, the Indian Government has issued a press release announcing FDI reforms across fifteen sectors, including some big changes related to Single Brand Retail Trading (SBRT) and E-commerce companies.

The relaxed norms contain the following two notable points:

Presently, the FDI policy considers the date of receipt of the FDI for sourcing 30% of the value of goods. With the changes announced today, the period starting from the date of opening of the first store will instead be considered.

Secondly, and more importantly, the govt. has also considered making special exceptions. Section 8 (i) of the press note states that:

Further, it is seen that in certain high technology segments, it is not possible for retail entity to comply with the sourcing norms. To provide opportunity to such single brand entities, it has been decided that in case of ‘state-of-art’ and ‘cutting- edge technology’ sourcing norms can be relaxed subject to Government approval.

This means that for some companies (Hint: Apple), it is now possible to get an approval from the govt. without the fulfilling the sourcing requirement. Seeing company-operated Apple Stores in India doesn’t seem like a distant dream any more.