India's Foreign Investment Promotion Board (FIPB) is not ready to ease the 30% local content sourcing regulation for Apple, which is a setback to its plan to open retail outlets in the country.
Apple has been planning to set up stores in the Indian market, where more than a billion new smartphones are projected to be sold in the next few years.
The proposal to open stores under the single-brand policy has been approved, but there will be no relaxation to Apple on the 30% local content sourcing requirement regulation.
A senior official of the Indian Government was quoted by The Economic Times as saying: "Apple's proposal is acceptable to us but we cannot make an exception for it and forego the sourcing requirement if it wants to set up its own stores here."
The company currently manufactures most of its products in China.
The FIPB waives off the 30% local content sourcing norm if companies have cutting-edge technology that cannot be sourced from the country. However, the board believes that the Apple's case does not come under this category.
This decision could be still be overturned by the government.
With a population of more than a billion people, India is a significant market for companies such as Apple and Google.
According to Morgan Stanley's report released last month, India will have an 11% share in global smartphone shipments by 2018.