IKEA one step away from India entry

23 Jan '13

2 min read

IKEA’s Rs. 100 billion revised investment proposal has obtained the Foreign Investment Promotion Board’s (FIPB) approval and it now awaits approval from the Cabinet Committee on Economic Affairs (CCEA), which would pave way for its entry into the Indian market.

Once the CCEA gives green signal to the proposal, the Swedish retailer would be able to set up retail outlets, along with its well-known cafes, and sell products in 18 categories, in India.

FIPB had earlier cleared IKEA’s proposal on November 21, 2012, but it did not permit the company to sell several items like home and office-use items, apparels, textiles and fabric. FIPB also did not give permission for setting up cafes in the outlets.

However, the company was keen on replicating its global format stores concept in India, and hence contacted the Department of Industrial Policy and Promotion (DIPP) asking for a review of FIPB’s decision.

DIPP, which frames the Foreign Direct Investment (FDI) policy, forwarded the company’s revised proposal to FIPB, with a direction to consider the matter positively.

FIPB has now given its nod to the revised proposal and allowed IKEA to retail three more product categories as compared to earlier 15 categories.

Since the FIPB is authorized to clear investment of only up to Rs. 12 billion, IKEA’s proposal would now be placed before the CCEA for obtaining its approval.

Last year, India relaxed the mandatory rule requiring the foreign investors to source at least 30 percent of their production requirements locally over a period of five years.

India’s FDI rules also insist on a single sourcing and retailing entity, but in IKEA’s case the DIPP and FIPB have permitted the retailer to have a separate subsidiary for sourcing.

Fibre2fashion News Desk - India

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