In mid-2015, Modi announced several policy changes that were designed to open India’s economy even further to foreign investment. One change grants foreign single-brand retailers a three year grace period for complying with local-content rules requiring that at least 30 percent of manufactured materials in the products they sell are sourced in India. Tech retailers offering “cutting-edge” or “state-of-the-art” products have an additional five years to comply.
Foreign Investment Increases 

This policy change paves the way for Apple to open its own stores in the world’s second-largest smartphone market. Apple currently has an approximately 3 percent market share in India. Apple requested an exemption from the local-sourcing requirements, and a government panel ruled in the company’s favor. However, India’s finance minister and the Foreign Investment Promotion Board rejected the panel’s findings, thwarting Apple’s retail plans for the near future.
Amazon is another tech company that is targeting India for its growth potential. In doing so, Amazon India is competing with entrenched local e-commerce companies including Flipkart and Snapdeal. The key to success, according to CEO Jeff Bezos, will be local market customization. This approach embodies lessons learned in Amazon’s failure to penetrate China’s e-commerce market. In India, Amazon will accept payment in cash for shoppers who don’t use credit or debit cards. Also, customers can shop using tablets installed in local shops.
One challenge is that Indian regulations prevent Amazon from using an “inventory-led” business model. In essence, Amazon cannot sell its own goods, but rather must adhere to a “marketplace model” in which the technology platform brings buyers and sellers together. Also, no single vendor is allowed to account for more than 25 percent of products sold. In spite of such restrictions, Amazon’s investment in India has totaled approximately $5 billion to date.
In addition to retail, other sectors of the Indian market are being liberalized. For example, foreign investors will now be allowed to have 100 percent ownership of Indian airlines; previously, ownership stakes by foreign investors were limited to 49 percent. In the defense sector, full foreign ownership of arms-related projects will also be allowed. U.S.-based Boeing is taking advantage of the new rules to form a partnership with India’s Tata Advanced Systems to make aircraft frames.

Questions
1. Social activists and political opponents in India have voiced objection to Modi’s economic liberalization initiatives. What do you think is the nature of some of these objections?
2. Do you think Modi’s large number of social media “likes” and “followers” are indicative of his potential to achieve economic reform?
3. Assess Modi’s two main economic reforms—namely, demonetization and tax reform.
4. What must Wipro, Infosys, TCS, and other companies in India’s IT sector do to avoid being victimized by new trends in technology?