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Tuesday, 05 July 2016 07:04
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Govt does well to call Apple after FDI policy change

 

It was never clear why, after trying to pave the way for Apple to set up its own branded stores in India, the government rebuffed the Cupertino giant and insisted it meet the UPA period’s rule on 30% local sourcing for those foreign firms that wished to set up single-brand retail operations—last November, the NDA government had said the norm would be relaxed for ‘cutting edge’ and ‘state-of-art’ technology firms, a label you would normally think applied to Apple. Indeed, Apple announcing it would hire 4,000 people in its Hyderabad centre to work on maps was seen as just an initial indicator of what it had to offer by way of creating jobs in highly skill-intensive areas. Despite this, however, the government didn’t relax the norms for the company, on grounds it would have to do the same for others, as a result of which the Make-in-India plan would suffer—it didn’t help that there was no real definition of what ‘cutting edge’ or ‘state-of-art’ really were.

Given what Apple has to offer, last fortnight, the government had a change of heart, and came up with further clarifications on the relaxations—it said that these would be relaxed for the first few years. Normally, things would have stopped there and it would be up to Apple to reapply under the new norms. This time, however, according to a report in The Economic Times, the government is taking no chances and has reached out to Apple to inform it of the new norms—it is now up to Apple to indicate if it is still interested. Since Apple has been lobbying for this permission—a Genius Bar at its stores, for instance, will allow it to offer a lot more technical advice to wannabe buyers—chances are it will jump at the opportunity. While the government should never have rejected Apple’s application in the first place, the fact that it has reached out to Apple is a good sign since it sends out a strong signal on India’s readiness to learn from its mistakes and to court industry at a time when the growth outlook of the rest of the world looks unpromising. With a more relaxed time-frame for local sourcing, chances are that Apple as well as others who get this exemption will find it easier to develop supply chains in India. Also, if the government was to use fiscal disincentives for those importing phones in CKD form, it would go a long way in encouraging domestic value addition. Two years ago, the budget brought in higher countervailing duties which ensured more firms started assembling phones here—extending this to the PCB part of phones would ensure more value addition and eventually, designing of phones, which is where the main money is.

 

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