Apple's market share in India is about 2% while in China it's about 7 percent. Apple's profit margin is generally about 30%.

The import tax in India is now 20%. Lets suppose Apple could increase market share in India to match that in China by reducing prices by the 20% tax, and compare that to keeping the 20% as extra profit but not increasing market share.

2% market share on 50% profit margin (existing 30% margin plus tax margin of 20%) sounds pretty good. However 30% profits on 7% market share yields more than double the overall profits.

Finally, all the arguments you make for charging more apply equally well anywhere in the world. So why doesn't Apple charge India prices everywhere in the world already? A simple argument that increased profit margin always beats higher sales implies that the perfect price point is infinity. At some point this strategy must yield diminishing returns.

Or else the cost of producing a relatively small number of phones inside India won't be as cheap as the global HQ operation. If import taxes were the only consideration, you might expect them to open a new small factory when the extra cost of running it was about equal to the taxes.

Quite a few countries have car industries which work roughly like this -- the local VW plant will cost twice as much to run (per car) as the mothership, roughy matching a 100% import tax. (Although in reality there is often more to the story, like producing exactly one model there & exporting those for credit against imports...)

India raised it to 20% in 2018. https://money.cnn.com/2018/02/01/technology/india-iphone-tar...

Then there is 12% tax on top of that.

Sales might even reduce, because some people might not consider them luxury enough anymore.