My money is on India!
Foreign companies are only allowed into India’s markets by permission given by the government.
There are no super markets for example. No 7-11 network that sells cheap and puts the tens of millions of sole traders out of business.
Apple has to open a factory to be able to operate within the country. The Indian government needs balance in order to grant permissions.
I’d be surprised if Apple continued to have access whilst resisting the governments efforts to make online trade more secure.
Obviously Apple has to resist, the demands are at the very least contentious. That said I think the Indians have the leverage.
Apple's whole business model around iDevices is around personal security and privacy - they don't need any "help" from the Indian government. Contrary to what that telecom manager claims, this is nothing but a backdoor for the government to start tracking and snooping on its citizens. Ask yourself: if that app is so helpful to people, wouldn't they cheerfully install it on their own? Just put it on the App Store and start a marketing campaign to let citizens know about this great new app.
I think whoever wins the public's support will win this one. If the public doesn't care, then the Indian government might play hardball - and Apple will either fold or, if it thinks it can afford to, pull out of India (not very likely). But if the public does care that the government is snooping on them, India will quietly soften or withdraw its demands. It seems like the latter is already happening - the telecom minister said that users can 'deactivate at any time'. When I first read about this demand, it seemed like this app would always run, always get updated, and should not be removable. The minister didn't say it'll be removable, but de-activating seems similar (depending on whether de-activation is iOS enforced or just "Promised" by the app itself).