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Apple Denied Key Exemption for Retail Stores in India

Bloomberg reports that Apple has been denied a key exemption that will likely scuttle Apple’s plans in the short term to open official Apple Retail Stores in India:

India’s finance minister has ratified a decision that Apple Inc. must meet local sourcing rules to open its own stores, according to people familiar with the matter, dealing what may be a fatal blow to the iPhone maker’s effort to open retail outlets in the country.

Minister Arun Jaitley decided to support the decision by India’s Foreign Investment Promotion Board that Apple will have to procure 30 percent of components locally if it wants to sell through its own retail stores, said the people, asking not to be identified because the matter is private. The company makes most of its products in China and doesn’t currently meet that criteria.

It comes after another government panel had recommended, in late April, that Apple be granted the exemption. But more significantly, today’s move comes after Tim Cook visited India in his first official trip to the country as CEO of Apple.

The decision by India’s finance minister may not be the last word, as Indian Prime Minister Narendra Modi could theoretically intervene. During Cook’s trip to India he met with Prime Minister Modi and Apple’s retail plans were reportedly discussed, as was Modi’s “Made in India” program which encourages foreign companies to manufacture in India. In public comments during the week Cook suggested that Apple was looking to establish a facility in India that would refurbish old iPhones for resale in India, but had no plans for other manufacturing at this stage.

If you’re interested in reading more about Cook’s week-long tour of India and China (which occurred last week), I wrote about the context of the trip as well as providing a timeline of what actually happened.