New Delhi, Jan. 20: The Foreign Investment Promotion Board (FIPB) will discuss IKEA’s investment proposal in its entirety on Thursday.
Earlier, the board had approved a part of the proposal but kept in abeyance the Swedish company’s offer to set up cafeterias in its stores among other things.
IKEA’s proposal is being seen as a test case of the Indian government’s willingness to further open its doors to investors, particularly after the intense political opposition to FDI in multi-brand retail.
The board in its last meeting had sought clarifications on the investment plans of the Swedish retailer.
In November, the FIPB had capped IKEA’s investments at Rs 4,200 crore against its original proposal of Rs 10,500 crore, permitting the furniture maker to offer a narrow range of products through its proposed stores.
While clearing the plan, the FIPB had barred IKEA from opening cafeterias in its retail outlets and selling any products that it does not brand, including second-hand furniture, textile products, toys, books and consumer electronics.
However, IKEA had written to the commerce ministry that in keeping with what it called the “Ikea concept”, the company must be allowed to retail its entire range of products in India and run in-store restaurants, as it does in every country in which it has a store.
The department of industrial policy and promotion, an arm of the commerce ministry, has favoured the opening of IKEA stores with its entire range of products.
Once the FIPB vets the proposal, it will be reviewed by the cabinet committee on economic affairs as the board can clear investment applications worth up to Rs 1,200 crore only.
Analysts said, “The government’s move on the IKEA case is being closely watched by other global players planning to enter the Indian market. A positive action in this case would send a strong signal to investors and policymakers about its commitment to the reform measure.”
IKEA, the world’s largest furniture retailer, operates 336 stores in 44 countries.
The Swedish firm plans to set up 10 furnishing and homeware stores as well as allied infrastructure over 10 years in India. Subsequently, it plans to open 15 more stores.
The IKEA investment in single-brand retail will be the biggest in this segment after the government opened up the sector to foreign direct investment.
Rising concerns from IKEA and other global retailers prompted the government to tweak the sourcing norms for FDI exceeding 51 per cent in single-brand retail.
The government diluted the previous condition to source 30 per cent of requirements “mandatorily” from micro, small and medium enterprises by stating that sourcing should be done “preferably from MSMEs”.