Apple Inc (AAPL.O) could open its first stores in
India and might eventually start manufacturing in the country under new foreign
investment rules for retailers outlined on Monday.
The
new rules exempt foreign retailers for three years from a requirement to source
30 percent of the goods sold in company-owned stores locally.
That
would allow Apple, which currently sells its iPhones, iMacs and iPads through
resellers, to set up its own shops in India, ending months of uncertainty for
the California-based company that had first applied for store licenses in
January.
India
is the world's fastest growing large smartphone market with sales expected to
rise over 25 percent this year.
For
Apple, which has less than a two percent share in the smartphone market in the
country, gaining a bigger footprint in India is crucial at a time when growth
in China and the U.S. has stalled.
The announcement was
part of a sweeping reform of rules on foreign direct investment, which also
opened up the defence and civil aviation sectors to full foreign ownership.
The
retail rule changes are also likely to help Swedish furniture-retailer IKEA
[IKEA.UL], which is setting up stores in Hyderabad and Mumbai, to expand
operations.
Apple
had sought to get around the sourcing rules by citing a clause that exempted
retailers of "cutting edge" technology from the requirements, however
sources had told Reuters that some government officials had quibbled over
whether Apple products met that criteria.
The new directive paves the way for Apple to
resubmit its application and rapidly start retail stores in India. It can also
seek an additional exemption for five years if it convinces the government its
products meet the "cutting edge" criteria.
Analysts
said opening the door for Apple retail could also lead to Apple looking
favorably on India as a manufacturing destination.
"The
government hopes that if they can show them that is the market where consumers
are Apple will be more willing to start manufacturing operations here,"
said Neil Shah, an analyst at Counterpoint Research.
India
has been lobbying Apple and its partner Foxconn (2354.TW) to
begin manufacturing in the country as part of Prime Minister Narendra Modi's
agenda to bring in foreign manufacturers to India to create millions of jobs.
The
announcement comes a month after Apple boss Tim Cook met Modi to discuss
Apple's plans for retail and manufacturing in India as part of his first-ever
trip to the country.
Representative
Image
Source:
Reuters
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