Fruit of Patience may not be served on plate even if IKEA enters India

03-01-2013 |  nrupaldiffion |    Bubbles

Their menu card specials boasts of the Swedish tradition but never forgets the local favourites; you get Chicken shawarma in Saudi Arabia and UAE, croissant in the Netherlands, hash brown with scrambled egg and bacon in Australia, country potatoes and bread rolls with smoked salmon in Germany, French fries in Malaysia and boiled potato elsewhere along with the meatballs, cream sauce and lingonberry jam. But whether the menu card is getting a touch of Indian flavours, remains yet to be decided as IKEA plans to invest in the single brand retail business in India.

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  • The Swedish furniture giant had applied for a Rs. 10,500 crore investment in India June in a prompt response to the removal of sectoral cap in single-brand retail. It took four months of negotiation with the Govt. before finally giving in to the 30% local sourcing rules. As if that wasn't enough to deal with already, to add to the hurdles came the decision of the Foreign Investment Promotion Board (FIPB) of India to slash the number of categories of products that IKEA can sell from 30 to 15.
  • The list of rejected products include home and office use products, textile products, leather products, cosmetics, lifestyle products, gift articles and the food and beverages to be served at the signature restaurants and cafe in IKEA retail stores while the chain's main business i.e. the furniture products remain in the permitted category along with utensils, cooking range equipments, mirrors, tableware and glassware products. Also, none of the financial schemes by IKEA are permitted according to the FIPB recommendation that says no to activities falling within the purview of non-banking financial companies.

  • The plan has already been recommended to the Cabinet Committee on Economic Affairs. In their response, an IKEA spokesperson said, The IKEA group must have the ability to retail its entire range of products in India as is being done globally in every country where IKEA is located. This is as per the IKEA concept. We have no intention of setting up independent standalone IKEA restaurants. The approval for the restaurant and cafe should not be an obstacle in our application and it is a part of the IKEA concept and not a separate proposal.
  • Though the Commerce minister, Anand Sharma, says government could see no reason why IKEA's global model has to be changed in any manner, the issue remains unsolved. IKEA's proposal will be taken up next week. No decision was taken today. More information has been sought from IKEA, says Economic Affairs Secretary Arvind Mayaram.

This may not only put a question mark on the feasibility of the plans of the world's largest furniture retailer that operates 336 stores in 44 countries, but also dampen the spirit of many other single-brand retail chains including some from Europe who have been waiting for the approval of IKEA's investment and view this as a test case before sending their applications.