Apple is having a tough time breaking into India. If Apple wants to open up physical stores in the world's second-biggest country, it's going to have to sell locally sourced products, according to a report from Reuters. Apple reportedly lost out on an exemption to the rule that requires foreign companies to offer Indian products in their stores. This is the second major setback for Apple in the past month, after it was blocked from selling or importing refurbished phones due to the potential to increase India's e-waste problem.

The exemption was for companies selling high-tech goods, according to Reuters, but Apple failed to meet the qualifications. According to the rule as interpreted by The Economic Times, foreign companies subject to the rule must source 30 percent of the value of its goods from India. If Apple wants to open retail stores in India, it would require dramatically altering its production lines to incorporate Indian goods, something that it may not be willing to do.

Apple has made it clear that India is the next big market for the company. It invested $25 million in a new technology development center in Hyderabad, and CEO Tim Cook recently wrapped up a four-day meet-and-greet in India that included an official visit with Prime Minister Narendra Modi. With only 2 percent of the smartphone market in India, Apple has a long way to go before its presence is truly felt, and it doesn't look like the Indian Government will help to make it any easier.