The Centre appears all in a bind over iPhone-maker Apple’s request for a waiver from mandatory local sourcing norms that the company needs to meet before setting up its own retail outlets in the country. The commerce ministry has hinted that it is in favour of granting an exemption to Apple, but the finance ministry does not seem to agree. According to the rules for foreign direct investment in single-brand retail stores, those proposing to own over 51 per cent equity will have to commit to sourcing 30 per cent of the value of their goods locally, preferably from MSMEs and village and cottage industries. Apple wants this rule waived on the grounds that it sells a “cutting edge” product and local sourcing would be impossible. Arguments over whether the iPhone is indeed a “cutting edge” product aside, the fact is that multinationals such as Apple operating in the technology space rely on global sourcing; they have their own supplier ecosystem developed over the years. Viewed from this angle, Apple’s request appears fair.

The problem though is that the Centre cannot be seen as making an exception for one company, howsoever popular its product might be. Its predicament now offers a good reason to review and revamp the policy on local sourcing norms for single-brand retail. It is a bad idea to link investment in retail with manufacturing or local sourcing in an age when multinationals depend on global sourcing networks, especially when there is no ecosystem within the country to support local sourcing. There are jobs to be created in retail as much as in manufacturing and the Centre needs to be careful not to put off prospective investors through restrictive sourcing rules. It might, therefore, be a good idea to review the local sourcing condition in the policy, and not just for Apple. That said, we need to develop a more nuanced approach to promoting local manufacturing.

Meanwhile, Apple has also sought permission to sell used, refurbished phones in the country. The Centre is not in favour of giving its consent and rightly so. Selling refurbished phones at a cheaper price than the newer ones might help Apple break into the volume market but it is not in the country’s interest. The last thing India needs is to become a dumping ground for used products that will add to the growing problem of e-waste. There is no reason why Apple’s competitors, as indeed other durables manufacturers, might not want to do the same. The government needs to soon frame a policy for handling and recycling e-waste, not to mention rules for the sale of refurbished electronics and gadgets originally produced in the country.

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