Apple could have trouble opening Apple Stores in India

The company reportedly won't be exempt from requirements that 30 percent of products be locally sourced.

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Just last week, a report claimed that Apple had plans to open four stores in India by the end of 2017.

Not so fast, says India’s fiance ministry.

Two government officials told the Wall Street Journal that the ministry has rejected another government panel’s recommendation that Apple shouldn’t have to comply with local sourcing rules.

“We are sticking to the old policy,“ one of the officials told the WSJ. “We want local sourcing for job creation. You can’t have a situation where people view India only as a market. Let them start doing some manufacturing here.”

India’s rules only allow 100-percent foreign ownership in a single-brand retail store like the Apple Store if they source 30 percent of their products locally. Earlier this year, Apple confirmed that it had filed an application to set up at least one store, and the government does consider exemptions to the local sourcing rule on a case-by-case basis.

If Apple can’t get an exemption, it probably can’t open any stores in India. This news comes a few weeks after India’s government rejected Apple’s application to sell refurbished iPhones there, even if Apple certifies them and gives each a new serial number.

Why this matters: India is very important to Apple’s future growth. The smartphone market there is the third largest in the world, and growing fast—smartphone penetration is only at 30 percent, according to IDC. In the fourth quarter of 2015, 25.6 million phones were sold in the country, a 15.4 percent growth over the previous year, also according to IDC. Samsung has the most market share, followed by Indian vendor Micromax, and Apple isn’t in the top five. But in the first quarter of this year, iPhone sales in India saw 56 percent growth year-on-year.

Apple opened a developent office in Hyderabad earlier this year, with 150 employees, plus contractors, working on Apple Maps. Tim Cook recently visited the country, and announced another facility in Bangalore, to be called a Design and Development Accelerator, aimed at supporting the large iOS development community there.

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