Apple may be asking for too much to “Make in India”: here’s why the govt needs to be smart

Apple Inc is big for India, because it is, in the language of a government official, a “marquee” investor — someone who is held up as a showpiece to attract others — in addition to being a jobs booster.

India is big for Apple, because it a huge market, the fastest growing (more or less) major economy in the world, and above all, teeming with teens and 20-somethings in a demographic explosion that would make any gadget maker drool.

Sadly for both, this does not appear to be a “Made for Each Other” situation as it might seem at first sight because their intents are not that simple. No wonder the impending big-bang Apple expansion into India has been impending for a while, although there are signals that the two are keen to play ball with each other.

Here are the glitches
Apple loves to be fawned over with welcome boards and tax breaks, but its main eye is on customers who can swoon over its products and provide it with hefty profit margins for the brand and the cool factor that its gizmos are famous for.

India would love to roll out a red carpet, but essentially wants a jobs-for-market-access deal in which Apple would make products locally so that local incomes are generated alongside local consumption. More significant, a red carpet cannot get in the way of a transparent industrial policy in which bad precedents can create hassles later.

Here’s where Apple’s once rejected plan to sell “refurbished” phones in India is a big pain for the government. Apple is now having a second go, like a lover coming back with a new wedding proposal. It has apparently told officials that its “certified pre-owned program would meet environmental and quality requirements.”

This apparently addresses the Indian concern that the nation should not become a dumping ground for used goods, although affordable iPhones should make sense for price-consicous local customers. However, Apple can ride piggyback on Indian customers in a strategy where it can upsell advanced handsets to its Western customers in exchange offers and then sell the returned ones in India at a neat profit.

The catch is that this can undermine the “Make in India” programme because refurbished phones do not create enough jobs, unless you count in service centres or distribution outlets. India must weigh this carefully because it is said to be mulling a 15-year tax holiday for Apple. A tax holiday plus easy market access may be too much to woo a company just because it is a “marquee” brand.

Local manufacture makes sense for Apple when you consider transport costs and duties and taxes that swell up import prices in India, which can be 10 to 20 percent higher than US prices.

Apple also has a long-term gain in selling refurbished phones in India. People used to the iOS once through refurbished models are more likely to upgrade to an iOS phone and that will provide Apple with a new sales opportunity in an increasingly affluent India. Also, there is a robot out there, that can strip used iPhones down and help Apple make money from recycling. As far as we know, Apple is not directly selling used iPhones anywhere else on the planet.

Seriously, government officials in New Delhi seriously need to ask themselves: What is in this for us? Also, India is already home to IBM, Accenture, Microsoft, GE and a whole lot of Western “marquee” names that are spinning hundreds of thousands of jobs in the country

What Apple offers must make more economic sense and long-term value for India

The recent announcement that Apple will assemble iPhones in a Bengaluru suburb does not go far enough in answering how big its proposed Indian facilities will be in comparison to its Chinese factories run by partners like Foxconn. It is important to keep in mind that robotics are taking over assembly lines and we need a real jobs-for-market perspective before tax breaks can be handed on a platter.

Most importantly, anything that India offers to Apple will be used as a precedent by other investors to drive hard bargains. The “Make in India” dream cannot be a loose door for concessions the way India allowed tax concessions for investments from Mauritius to become a vehicle for money-laundering or tax evasion.

Prime Minister Narendra Modi’s smiling photo opportunities with Apple’s CEO Tim Cook and his own sharing stories of Apple’s plans to manufacture in India may be considered as signals for a red carpet for Apple.

But there is no doubt that the terms and conditions linked to Apple’s manufacturing plans in India will be toothcombed by critics, opposition parties and Apple’s rivals. A lot will depend on the details.