New FDI norms: Apple might set up fully-owned stores in India

If the 30% sourcing clause is waived off, the tech giant might even set up a manufacturing base in the country

The government has not spelt out the exact rule change linked to high-technology segments under single-brand retail, and the new norms are being interpreted as waiving of the mandatory 30 per cent sourcing from India. If that happens, iPhone and iPad maker, Apple Inc, may look at India soon for setting up fully-owned stores in India, and perhaps also explore manufacturing its products in the country. At present, Apple products are sold through franchise stores in India. Besides Apple, the revised rules may help others such as Sony and Huawei.

During his recent US visit, Prime Minister Narendra Modi had invited Apple CEO Tim Cook to set up a manufacturing base in India.

A government statement on Tuesday said, “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-the-art’ and ‘cutting-edge technology’, sourcing norms can be relaxed subject to government approval.” It did not say what the relaxed sourcing norms would imply.

Under the present policy, any foreign company — with more than 51 per cent foreign direct investment for setting up stores in India — must source 30 per cent from India, a clause which has till date prevented many high-tech product makers from setting up fully-owned stores in the country.

According to Nasscom, if the move gets government approval then it could provide a big opportunity for the country. “If these initial barriers are lowered, multinational companies would have lesser constraints of manufacturing in India and have more confidence to set base. Over time, the capabilities would increase and this would provide a huge advantage to Indian vendors. This move will open avenues as many will see India as a possibility and could pave way for setting up more R&D centres in the country,” said Bishakha Bhattacharya, senior director, Nasscom.

Manufacturers believe that if the sourcing norms are eased then the process of setting assembly lines can start in India.

"This is largely a positive development, as the indigenous clause is a challenge in electronics sector and effects in starting business. If the norms are relaxed we will see big tech companies start the assembly process in India. Not only companies like Apple but a lot many major electronics manufacturers from Taiwan would also set base here," said Rajoo Goel, secretary general, ELCINA--Electronic Industries Association of India.

An official at Chinese telecom giant Huawei Technologies, which could soon set up a manufacturing base in India, said the company was looking through the changes in the FDI norm. The company had earlier said it was keen to supply locally made products to India's fast-growing mobile market, which has more than 975 million users.

Manish Sharma, president, CEAMA (Consumer Electronics and Manufacturers Association of India) and managing director, Panasonic India & South Asia, said: "The relaxation provided under the new FDI norms by the Government of India is aimed to boost foreign investment flows into India. The liberalisation brought about by this will indeed provide lot of comfort to the foreign investors and will encourage the present government's initiative under 'Make in India campaign' across segments.''