Swedish furniture maker’s application to head to Cabinet panel for final okay

Swedish furniture giant IKEA’s proposal to pump Rs 10,500 crore into the furniture retailing business crossed yet another hurdle on Tuesday when the Foreign Investment Promotion Board (FIPB) approved the investment plan.

Even as IKEA gets closer to selling its line of self-assembly furniture to Indian consumers through its own retail outlets in the country, the FIPB decision signalled a concrete step forward on opening up the retail trade and pushing up dwindling foreign direct investments.

Final vetting

Economic Affairs Secretary Arvind Mayaram confirmed the development after the meeting of the nodal agency for foreign investment approvals.

IKEA’s proposal, one of the largest FDIs in single-brand retail trade, will now head to the Cabinet Committee on Economic Affairs for final vetting as the FIPB can clear investment applications worth up to Rs 1,200 crore only.

Plans for 25 stores

IKEA is the second foreign retailer after UK-based footwear company Pavers England to get FIPB approval to set up wholly-owned stores in India.

IKEA had approached FIPB in June this year seeking permission to set up 25 stores in India.

IKEA, which sells everything from bottle openers to furniture, will be investing in India through its 100 per cent subsidiary, Ingka Holding Overseas B.V.

The retailer had earlier voiced concern about the sourcing clause but chose to go ahead with the investment after the Government relaxed the clause on 30 per cent sourcing from small and medium enterprises. IKEA currently sources products worth $450 million from Indian exporters. The Government, as part of its big-bang reforms, had also allowed opening up of multi brand retail trade. This gave an impetus to the plans of retailers such as Wal-mart Inc and Carrefour SA to own up to 51 per cent in multi-brand retail ventures.

An IKEA spokesperson, when contacted on Tuesday, said: “We will wait for the Cabinet approvals”.

In an earlier statement, the company had said: “The IKEA Group has a long-term vision for India and it is a very important market. It takes time to be able to fully live up to all the requirements and we need to have a long-term strategic outlook and partnership with key stakeholders over a period of time.

‘Huge potential’

“The plans as outlined in the application are estimations based on previous experience in other markets and our belief that India has huge investment potential.

“We respect the Indian government’s views and thoroughness in the approval process. We remain positive to be able to start retail operations soon.”

bindu.menon@thehindu.co.in

(This article was published on November 20, 2012)
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