Apple vs India's 30% Local Content Requirement

Apple and India don't mix--or rather Apple and protectionist retail policies.

India remains one of the last few large economies worldwide that remain avowedly protectionist in the retail sector. Even in the modern era, lawmakers have sought to appease mom-and-pop operators from the rigors of market competition. It's a small-time mentality that the government upholds with bureaucratic ferocity. "Multibrand" retailers, or large foreign retailers in particular carrying a wide range of branded products, have been subject to restrictions on entry, foreign ownership and local content requirements. Witness the earlier travails of Walmart. As a result, retail inefficiencies result in smaller selection and higher prices. not a good combination.

Now, the retail battle against all sorts of foreign devils has moved on, pitching the world's second-largest corporation against the world's second-most-populous country. With nearly nothing it currently sells being made in India--China yes, India no since it doesn't specialize in electronics assembly and manufacture--Apple is hard-pressed to meet the 30% local content requirement there:

US company's proposal to set up Apple Stores under the singlebrand 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.

Apple had applied for the relaxation under new foreign direct investment rules for companies bringing cuttingedge technology to India. The policy allows the sourcing condition to be waived for cutting-edge technology, a term that hasn't been clearly spelt out. The government has set up a panel to clear proposals seeking relaxation of this norm...

According to revised norms announced by the Department of Industrial Policy & Promotion in November 2015, companies that bring cutting-edge and state-of-the-art technology to India can open singlebrand outlets without meeting the local sourcing norm, subject to government approval.

In some respects India has moved forward; in retail it remains decidedly stone age--and that's not good news for modernizers like Apple.