India reportedly chooses indigenization over Apple's demand for tax-free imports
The Indian Government is apparently considering not bowing down to Apple and in all likelihood will not defer a planned increase in import taxes. Apple on the other hand is seeking import tax exemption and other incentives for expanding its operations in India — one of the world's fastest growing mobile markets. Apple is currently assembling the iPhone SE in the country.
The incumbent Narendra Modi administration is reportedly making it clear that incentivizing import of mobile components will have negative effects on the prestigious 'Make in India' initiative that the Government is patronizing as it will hurt the indigenous manufacturing sector. Apple is willing to increase local value addition over time but is steadfast in its demand for immediate import tax relief. India currently imposes a 10% import tax on mobile phone components such as batteries, chargers, and headsets. The number of components coming under the import tax purview will increase with time under the Phased Manufacturing Programme (PMP). This is to encourage component makers to set up shop locally and use local talent. Apart from tax exemptions, Apple is also trying to lobby for capital equipment incentives and import/export of phones after service. According to an IT ministry report, the policy changes that would have to be made to accommodate Apple's requests are currently not feasible.
The current public stand of the Government is that it is still actively considering Apple's request but insiders have made it clear that the Government is not willing to bow down to corporate pressure.
We have told them, please come and invest but we cannot do things that go beyond our policies. We cannot do things only for you,". "They are coming around (to our view).", said a source.
While India is poised to be a frontrunner in the smartphone usage race, the penetration of Apple iPhones in this lucrative market is only about 2%. Therefore, more than India needing Apple's manufacturing presence, it is Apple that would need to be flexible if it were to ever break into double-digit market share in the country. The company said it was looking to create 5,000 to 10,000 jobs in this initiative but going by the current developments this could be akin to building castles in air. The Indian Prime Minister's Office (PMO), the Ministry of Electronics and Information Technology, and Apple have all declined to comment.