Wednesday, October 3, 2012

Apple plans to set up its own stores in India if Govt eases local sourcing norms!

Apple Inc, the maker of iPhones and iPads, is evaluating the possibility of setting up its own stores in India, if the Indian government eases local sourcing conditions, said two senior executives who have business relations with the California-based company in India.

It might be easier for Apple, the world's most valuable company, to set up stores if the government allows its IT outsourcing operations in India to be included as part of the mandatory 30 per cent local sourcing requirement, the two executives said.

Apple refused to comment on its India plans or whether it would ask the government to provide flexibility with regard to local sourcing norms."We don't comment on rumours and speculation," said a company spokesman in reply to an email query.

Traditionally, India has not been a high-priority market for Apple, and it takes months before its newly-launched products start selling in India officially through re-sellers.
CEO Tim Cook had told analysts during a conference call two months back that the multi-layered distribution in India adds to the cost of bringing products to the Indian market.

But one of the executives mentioned above said the growing popularity of iPhones, iPads, and other Apple products in India was prompting the company to explore the option of increasing its engagement with the country.

"Undoubtedly, Apple is interested in setting up its own stores now that the demand for its product has increased. But it wants some flexibility in the 30 per cent sourcing norms. At present, it does not buy anything from India nor is it likely to source anything immediately, apart from IT services," one of the executives said, requesting anonymity.

Apple is famously secretive about its outsourcing contracts. Arecent media report said the company undertakes annual outsourcing projects worth Rs 500 crore from India and this is expected to rise significantly.

Like Apple, many electronics and high-end brands such as Sony and Rolex may want to set up stores of their own in India for better control and distribution, but the stiff sourcing norms have held them back. Typically, these companies make their wares in one or two countries from where they are shipped across the globe.

"To think that Rolex will suddenly start sourcing watch parts from India is absurd," said a person working on a few single-brand proposals said.

Diljeet Titus, senior partner at law firm Titus & Co, who is also working with single-brand foreign companies, including IKEA, said there is a way out for such marquee labels. "We will seek clarity from the government on whether a singlebrand retail company can fulfil the local sourcing condition by sourcing unrelated items, not core to its business, for exports to third parties. After all, the government's main intention is to augment manufacturing in the country and this clearly addresses the issue," he said, adding that one of his clients is ready for this option.

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