Recent news reports have claimed that Apple Computers might soon be allowed to open a chain of single-brand retail stores across India without fulfiling the standard regulatory requirements. The consumer electronics giant has reportedly made a pitch to the Department of Industrial Policy and Promotion, or DIPP, asking for a waiver in the requirement of local component sourcing. Consumers will be delighted if this occurs, since Apple's stores have raised the bar in terms of display, design and quality of customer service. A chain of Apple branded stores across India should also result in better technical support and quicker maintenance, repair and parts replacement for iPhones, Macs and iPads.
But all the lobbying, and presentations asking the DIPP to invoke clauses for exemptions ought to have been unnecessary. The regulations governing retail are much too complicated and restrictive, and the discretionary clauses can often be invoked subjectively. Other manufacturers of consumer electronics will be unhappy if Apple receives such a waiver and they do not. Several such proposals are said to be pending and held up due to rigid regulations. For instance, Xiaomi and LeEco are direct competitors to Apple and both have made applications to set up single-brand stores in India. Current policy allows 100 per cent foreign direct investment or FDI in single brand retail, but permission is required if the FDI holding exceeds 49 per cent. The company must also commit to sourcing at least 30 per cent of components locally. The "escape clause" (introduced in November 2015) allows for a waiver in the 30 per cent sourcing requirement if "state-of-the-art" and "cutting-edge technology" is employed. Apple is said to be asking for such a discretionary clearance, since the local sourcing requirement is one that neither Apple nor other high-end electronics manufacturers can meet in a hurry - the only thing Apple makes locally is the charger for some products. LeEco is said to be looking at setting up a manufacturing facility; but India lacks an ecosystem for manufacturing electronic components at the massive scale necessary to be cost-effective. The ongoing tax issues that led to the shutdown of Nokia's Chennai factory have made global manufacturers wary. If manufacturing is to be encouraged, such issues need to be resolved. Arm-twisting companies that wish to retail domestically is not the way to do it.
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To be sure, it is not in the consumers' interest to keep Apple out. In any case, the products are widely sold and serviced via distributors. But it is also not in the consumers' interest to keep out Apple's competitors. Exemptions pertaining to "state-of-the-art" and "cutting-edge technology" are open to subjective interpretation. Of course, Apple is innovative and state-of-the-art - but so are many of its competitors. It would be a complex process and a waste of time to set up criteria to judge "state-of-the-art" and "cutting-edge technology" across thousands of different categories of products. Indeed, the regulations pertaining to retail hark straight back to the era of the Licence Raj. Successive governments have tied the retail sector up in knots and done consumers a big disservice by setting up all these barriers. Ideally, such restrictions on retail should be removed. At the least, these must be reviewed to avoid discrimination between competitors in the same space.
