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Apple in India - Forbidden fruit

The trials and tribulations of doing business in India

Jun 4th 2016 | MUMBAI

MAKING the case that Apple s gizmos are not cutting-edge is a way to goad

devotees into an online tirade about the quality of the iPhone s camera or the

slimness of MacBooks. Such debates can usually be ignored by non-geeks. But not

in India: a ministerial decision deeming that the tech giant s products are not

cutting-edge has, in effect, kiboshed plans to open stores there. It is a

second reversal for Apple in a country it says is important to its prospects.

Apple s application to sell its gadgets through its own stores was rejected

because the devices in question are made outside India. Foreign-investment

approval is guaranteed only if 30% of a shop s goods are sourced domestically.

The tech firm unexpectedly failed to qualify for an exemption for products that

are state of the art . Where Apple stumbled is not clear, given the raft of

agencies and officials who need to chime in before the finance minister signs

off on each new investment proposal.

Arun Jaitley, the current finance minister, backed the decision on the ground

that the government of India was concerned with job creation. Perhaps sensing

such an argument might crop up, Tim Cook, Apple s boss, visited India for the

first time in May to unveil a development facility creating up to 4,000 jobs.

Many thought this investment to say nothing of a visit to Narendra Modi, the

prime minister, and Mr Cook s attendance at a cricket match would clinch it for

Apple.

Quite the contrary. Another one of Apple s plans was to sell refurbished

second-hand iPhones in the country, possibly the only way to square high prices

with Indian consumers thin wallets. But after furious lobbying by Apple s

rivals, that too has been rejected by ministers on environmental grounds

despite the firm promising to do the refurbishment in India.

These setbacks (which may yet prove temporary) are an annoyance for Mr Cook. A

regulatory filing suggested Apple crossed the $1 billion sales mark in India

for the first time last year, albeit out of $234 billion worldwide. He has

recently contrasted the firm s 56% rise in iPhone sales in India with slipping

shipments globally. That has much to do with Apple s tiny share of the

smartphone market in India around 2%, analysts reckon and saturation elsewhere.

India s smartphone market is growing at 30% a year, according to Strategy

Analytics, a research firm, as growth rates in other big markets such as China

and America now languish in single figures. Even if it gets its way with the

government, Apple may not benefit that much. Whereas in India the latest iPhone

sells for over 50,000 rupees ($740), the most popular smartphones are handsets

from Indian or Chinese brands costing just 1,000 rupees. Try finding anything

much for that price in an Apple store.