Apple executives met with Indian government officials on Wednesday to discuss a plan to make iPhones in the southern city of Bangalore, a person familiar with the talks told CNNMoney.
India's commerce ministry confirmed that the meeting took place but declined to comment on what was discussed. In a statement, Apple (AAPL, Tech30) said it appreciated the "constructive and open dialogue we've had with government about further expanding our local operations." But it would not go into detail.
Apple's plans to set up an iPhone production plant in India's main tech hub were first reported by the Times of India. The factory would be built in partnership with Taiwan-based manufacturer Wistron, the newspaper reported.
The iPhone maker is trying hard to increase its presence in the fast-growing south Asian country as global sales stagnate. A year ago, it applied to open retail stores in India.
CEO Tim Cook weighed in last May when he visited India and met Prime Minister Narendra Modi.
India is pursuing a "Make in India" campaign to attract companies such as Apple. Modi's government has taken several steps to promote foreign investment, including partial exemptions to a rule that overseas firms must source 30% of raw materials locally.
But so far it has stopped short of granting additional concessions to Apple, according to local media reports.
"The ideal thing for the Indian government would be that they treat everyone fairly," said Kiranjeet Kaur, a research analyst at consulting firm IDC. "What is special about Apple and why should the Indian government be giving [concessions] to this particular company only?"
Apple currently sells iPhones and other products in India through local distributors, but it lags far behind Samsung (SSNLF) and Chinese brands such as Xiaomi, Oppo and Lenovo in terms of market share.
The potential payoff is huge. India has more than 300 million smartphone users -- an 18% increase from the previous year -- according to technology research firm Counterpoint. It is projected to overtake the U.S. as the world's second largest smartphone market this year.
India's fast-growing middle class presents an obvious opportunity, but with average annual incomes of $1,500, most of its 1.3 billion people can't afford Apple's pricey products.
"If you're importing complete units the taxes for those are increasing and we don't see the government backing down in that regard," Kaur said. "For Apple, not having manufacturing in India raises the price of the iPhone even more."