Apple may face even higher iPhone taxes, import restrictions in India market
Apple may face tougher trading conditions in India in the future, after a top advisor to Prime Minister Narendra Modi insisted the country should restrict its import of luxury goods like the iPhone and tax them heavily, instead of raising interest rates to bolster the rupee.
Apple CEO Tim Cook with Indian Prime Minister Narendra Modi in 2017
In an interview, the Economic Advisory Council member Rathin Roy insisted the government needs to make it less appealing for the country's citizens to enjoy luxury goods, reports Bloomberg. "We need to actively send signals to disincentivize or discourage increase in consumption of what I describe as explicit luxuries," the adviser proclaimed.
These explicit luxuries include the iPhone, which Roy noted had seen increases in imports to India in recent times. As another example of luxury-based spending, Roy suggested the expenditure on overseas education and other services have also increased.
Roy's comments follow after an announcement by India's government on Wednesday that it had raised import taxes on a variety of goods, including jewelry and footwear, by $12 billion. The iPhone and similar goods have a good chance of being hit by future import tax rises, as electronics and gold are the country's biggest imports behind oil.
The four-year high of Oil is said to be making global funds nervous, groups who pulled $2.45 billion from local bonds and stocks in September 2017. Those withdrawals are claimed to have helped reduce the value of the rupee to record lows, making it the worst-performing currency in Asia according to economists.
A Bloomberg survey of economists reveals most would call for a 25-basis-point rate hike by the central bank, but Roy dismisses this, suggesting it isn't the right answer to fix the currency's poor situation. The government has also fought off attempts to short the currency, with measures to improve cash availability with banks forming part of the countermeasures.
The luxury goods rate increases would follow a similar path taken by Indonesia, another country with a current-account deficit. In Indonesia's case, the country took the opportunity to delay "import-heavy infrastructure projects" as well as increasing taxes on luxury goods imports.
While Roy's advice will be heard by Prime Minister Modi, it remains to be seen if it will be adopted by the country in the coming months as it tries to rectify the rupee. If India adopts the recommendation, Apple's existing efforts to increase sales in the country may be hampered.
Apple is currently awaiting permission to open full corporate-run retail outlets in the country, and has looked into opening premium franchise-owned outlets as a temporary measure. It may also be able to counter some of the import tax rises by expanding its existing iPhone production operations with assembly partner Wistron, which it uses to make the iPhone 6s for local sale.
Apple lost three local executives earlier this year, which the company replaced in August with a new head of operations. Michel Coulomb is reportedly pursuing an aggressive strategy to resuscitate iPhone sales, which have apparently dwindled to just 1 percent of the market.
A fight with the Telecom Regulatory Authority of India (TRAI) is an even bigger threat to its efforts, with a potential ban of iPhones from the country's mobile networks on the cards if the company does not comply with laws mandating the installation of an official anti-spam app. It is expected that Apple and the regulator will be going to court over the matter.
Apple CEO Tim Cook with Indian Prime Minister Narendra Modi in 2017
In an interview, the Economic Advisory Council member Rathin Roy insisted the government needs to make it less appealing for the country's citizens to enjoy luxury goods, reports Bloomberg. "We need to actively send signals to disincentivize or discourage increase in consumption of what I describe as explicit luxuries," the adviser proclaimed.
These explicit luxuries include the iPhone, which Roy noted had seen increases in imports to India in recent times. As another example of luxury-based spending, Roy suggested the expenditure on overseas education and other services have also increased.
Roy's comments follow after an announcement by India's government on Wednesday that it had raised import taxes on a variety of goods, including jewelry and footwear, by $12 billion. The iPhone and similar goods have a good chance of being hit by future import tax rises, as electronics and gold are the country's biggest imports behind oil.
The four-year high of Oil is said to be making global funds nervous, groups who pulled $2.45 billion from local bonds and stocks in September 2017. Those withdrawals are claimed to have helped reduce the value of the rupee to record lows, making it the worst-performing currency in Asia according to economists.
A Bloomberg survey of economists reveals most would call for a 25-basis-point rate hike by the central bank, but Roy dismisses this, suggesting it isn't the right answer to fix the currency's poor situation. The government has also fought off attempts to short the currency, with measures to improve cash availability with banks forming part of the countermeasures.
The luxury goods rate increases would follow a similar path taken by Indonesia, another country with a current-account deficit. In Indonesia's case, the country took the opportunity to delay "import-heavy infrastructure projects" as well as increasing taxes on luxury goods imports.
While Roy's advice will be heard by Prime Minister Modi, it remains to be seen if it will be adopted by the country in the coming months as it tries to rectify the rupee. If India adopts the recommendation, Apple's existing efforts to increase sales in the country may be hampered.
Apple is currently awaiting permission to open full corporate-run retail outlets in the country, and has looked into opening premium franchise-owned outlets as a temporary measure. It may also be able to counter some of the import tax rises by expanding its existing iPhone production operations with assembly partner Wistron, which it uses to make the iPhone 6s for local sale.
Apple lost three local executives earlier this year, which the company replaced in August with a new head of operations. Michel Coulomb is reportedly pursuing an aggressive strategy to resuscitate iPhone sales, which have apparently dwindled to just 1 percent of the market.
A fight with the Telecom Regulatory Authority of India (TRAI) is an even bigger threat to its efforts, with a potential ban of iPhones from the country's mobile networks on the cards if the company does not comply with laws mandating the installation of an official anti-spam app. It is expected that Apple and the regulator will be going to court over the matter.
Comments
I wonder what council member Rathin Roy uses for his personal mobile phone? Just wondering if it’s a ‘do as I say, not as I do’ scenario.
They'll get a trickle of government income by taxing "luxury" goods, but lose the productivity enhancement that comes with opening the doors to cooperation. Slicing their noses off to spite their face, IMHO.
A bit harsh IMO. AFAIK Apple has relocated their servers to China to support Chinese users with no backdoor for the PRC. Don’t see any issues there. Apple has removed apps supporting VPN from the Chinese App Store. Less good but not exactly selling its ‘privacy soul.’
I’m struggling with the comparison of India and China. The Chinese economy has a lot of flaws. But it’s economy is highly dynamic in a way India can only dream of right now. I find little that could be considered ‘smart’ about how the Indian government has been handling their economic affairs in recent years.
If that’s no longer good enough India’s facing major problems that have nothing to do with Apple.
Is any import going to considered a “luxury good”?
I suspect unsustainable population growth, and uneven distribution of wealth is causing systemic problems.
China addressed their population growth problem decades ago, India didn’t and it’s resulting in growing instability.
Traditionally the way to deal with this (population) is wars, but everyone around India is a nuclear power.
It feels like India is reverting to a 3rd world nation... they took advantage of exported services, but missed the boat on the rest.
“The major exports from India are engineering goods, refined petroleum, gems, jewelry, chemicals, agricultural products and textiles, the major Indian imports were crude petroleum, gold, coal briquettes, diamonds and petroleum gas.”
They’ve also been exporting their best and brightest.
Hypocrisy has a name, it appears to be Rathin Roy.
I’ve attached a screenshot.
It's a very corrupt country. A whole lot of them are trying to pull scams on the phone on American Citizens out of their money. They seem as clueless there as politicians here are. Raise taxes on this or that, and it's going to being in this much more money. What is the end result? It brings in less money and puts people out of work as people will just spend less money and not buy it. If people aren't buying it, you're not getting any taxes from it. So not it's NOTHING instead of something in taxes. Your tax hike just killed a little more of the economy. Quite frankly, the Government could tax everyone 100% of their money and it still wouldn't be enough as they'd a bunch more ways to waste it all.
So keep it up India and continue to live like a 3rd world country where people want to flee from.
https://m.hindustantimes.com/india-news/apple-executive-death-fresh-fir-says-vivek-tiwari-shot-by-putting-pistol-s-nozzle-on-windshield/story-vjwG0BdzUtCUrSNbEP4s7H.html
In the future Indians should be taxed at 100% for Modi’s Make in India plans.
I am from India and I agree with the above comments. The larger question remains - Do majority of Indians understand this? I don't know an answer to that question right now. We will come to know about it in another 8 months (May-2019 elections). Our PM Modi has been a divisive force, so I won't be surprised if some of the long timers (AnantKSundaram, BestKeptSecret etc) from India in this forum disagree with me and above comments.
We (people of India) are a long way to go in terms of maturity in upholding/implementing the spirit of democracy. Recently our Supreme court made very good verdicts on contentious issues (decriminalizing homosexuality, adultery as crimes), but MAJORITY of the people are criticizing the Supreme Court, without even understanding what the cases were about and what was the rationale behind SC's verdict. So it is going to be a long journey towards change for the better in my country.
By all indicators graft and corruption have decreased in india under modi. Even his most ardent critics will agree that it is definitely not worse than the previous dispensation that was riddled with multiple scam-of-the-century type events. By contrast under modi it has been 5 yrs without any major scam or minister being jailed etc.
Regarding tariffs, there is a narrative on appleinsider that India targets apple, which is not true at all. The rules are generic, and apply to all companies, not just apple. These are not new rules, or created now.
- India has higher taxes for products that are 100% imported, as compared to ones that are atleast 30% local across many product categories including phones. So, a car that is built using CKDs (Completely Knocked Down kits) like Lexus would cost almost twice as much as a car that is partly manufactured there like a mercedes.
- India has a huge population of small retailers with mom-and-pop stores that survive on multi-brand retail. So, they are partially protected through a rule which allows single-brand retail only to companies that have 30% local sourcing of components.
These rules apply across many sectors and verticals, and it is infact Apple that is asking for a special exception for themselves. Giving the exception only to apple can be construed as bias at the least, and corruption or under-handed dealing at the worst. So, exceptions were created not just for Apple but for everyone where they got a 2-year grace period before the rules take effect.