New Delhi: Swedish furniture maker Ikea completed filings this week as part of a Rs.10,000 crore plan to start selling its products in India after the government eased some conditions related to overseas investment in single-brand retail.
“After 25 years of sourcing many Ikea products in the country, Ikea Group has, as of end June this year, submitted its application to start retail operations in India and has filed the final document this week in accordance with the amended policy,” Mikael Ohlsson, president and chief executive of the Ikea Group, said in a statement.
Ohlsson told trade minister Anand Sharma in June that Ikea will invest as much as €1.5 billion (around Rs.10,740 crore) to set up stores in the country. On 14 September, the government relaxed norms on foreign direct investment (FDI) in single-brand retail on sourcing clauses and brand ownership, helping to lower entry barriers for foreign companies eyeing the Indian market.
“Once our application is approved, we will develop a solid plan for the establishment of Ikea stores for many years to come, generating investments and new employment,” Ohlsson said. “At the same time, we will continue to increase our sourcing in India from both existing and new suppliers, building on long-term relations and shared values.”
For most overseas firms, a rule to source 30% of all material from small Indian businesses has been a point of contention. Ikea had raised concerns on the mandatory sourcing norm and had asked the government to review the requirement and provide some “flexibility”.
The latest set of policy reforms eased the 30% rule on products sold through single-brand outlets by making it optional.
“Ikea’s concerns have been addressed with the last amendment so there should not be any problem that the company should face now,” said Arpita Mukherjee, a professor at the Indian Council for Research on International Economic Relations, a Delhi-based think tank.
“Overall it is a great development not in specific to Ikea but for other retailers at large. These investments and the entry of such global brands will only help galvanize the supply chain in the country,’ said Mohit Bhal, partner, transaction services at consulting firm KPMG. “The sentiment such a move evokes is certainly positive and will help consolidate the unorganized furniture market in the country.”
Ikea Trading (Hong Kong) Ltd-India, headquartered in Gurgaon, employs 140 people and sources Indian textiles, rugs, plastics, lighting and metal products for its global supply chain. As of June, it worked with 70 suppliers and 1,450 sub-suppliers, including many small industries.
“India is an important market for Ikea, both from a retail and a sourcing perspective,” Ohlsson said.