Budget impact: Electronic, fashion brands may accelerate India plans

Apple
US-based Apple and Japanese fashion retailer Uniqlo may speed up their India store roll-out plans as the government proposes to ease local sourcing rules in single brand retail. On Friday, Finance Minister Nirmala Sitharaman said the 30 per cent local sourcing norms in single-brand retail would be relaxed as she sought to make India an attractive destination for foreign players.

 

Sources said Apple, which had been looking to launch its stores in India since three years, would fast-forward its plans, targeting a launch in the next 6-8 months. Uniqlo, too, may aggressively focus on its India store launch in New Delhi this financial year, as mandatory local sourcing requirements are eased.

 

Uniqlo had indicated earlier that it was looking to launch its first India store in New Delhi in the fall period, that is, between October and December, but had not specified a date for the same. The company is likely to come out with specific plans in this regard shortly, persons in the know said.

 

Apple and Uniqlo were not immediately available for comment. But Uniqlo has begun hiring staff for its proposed store in Delhi and is also in the process of putting its backend in place. The firm may also push its presence into other cities once the Delhi store launch happens in a bid to capitalise on the conducive environment the government is looking to create for foreign players, said persons in the know.

 

“Currently, the foreign direct investment (FDI) policy on single-brand retail provides for local sourcing preferably from MSMEs (micro, small and medium enterprises), where the FDI exceeds 51 per cent. While there was a recent relaxation provided to foreign players allowing them to offset the sourcing from India for global operations against local sourcing, the same did not have the desired impact on FDI flows in the sector. Reluctance continued to be there among existing foreign joint venture players to increase FDI beyond 51 per cent as well as new foreign brands to enter the market. This reluctance will now reduce with the budget proposal to relax local sourcing conditions,” said Paresh Parekh, partner and national tax leader, consumer products and retail, EY India.

 

Uniqlo is looking to gain a strong foothold in India as it competes with rivals Inditex and H&M globally. Uniqlo is the world’s third-largest fashion retailer after Spain’s Inditex, which owns Zara, and Sweden’s H&M. While the latter two have been in India for a while now and are among top retailers, Uniqlo has no presence in the country yet.

 

For Apple, India stores are likely to help the company get its mojo back in a market it considers key. iPhone shipments for the January-March period fell 42 per cent over the year-ago period, data from Counterpoint Research shows, its steepest since 2015. While it grew threefold in April, shipments fell again in May and June, respectively.

 

                          Head start

  • Relaxation in local sourcing norms may push foreign retailers to speed up 
  • India launches 
  • Apple's retail plans held up for three years; keen to arrest market share loss in India  
  • Uniqlo is eyeing a strong foothold in the country; competes with Zara, H&M globally 


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