Swedish furniture major IKEA's Rs. 10,500-crore investment plan to set up a 100 per cent subsidiary in India has been cleared by the Foreign Investment Promotion Board (FIPB).
ADVERTISEMENT
ADVERTISEMENT
This includes nod to the company's proposal for having cafeterias at its retail outlets.
This would be the largest investment in the single-brand retailing ever since the government allowed foreign investment in this sector. In January, the government had notified 100 per cent foreign direct investment (FDI) in single-brand retail, paving the way for global chains like Adidas, Louis Vuitton and Gucci to have full ownership of their India operations.
IKEA's proposal now needs approval from the Cabinet Committee on Economic Affairs (CCEA).
"We consider this as a very positive development. We are now awaiting for approval from the Cabinet and subsequently a notification so that we can initiate the process of establishing IKEA stores in the country," said Juvencio Maeztu, country manager of IKEA Retail India.
"The FIPB's decision is a positive development. The government is committed to play a constructive role in encouraging FDI, specifically in areas that create jobs and provide technological advancement," Commerce and Industry Minister Anand Sharma said.
"Globally, IKEA has a business model which integrates in its embrace SMEs and domestic industry, thus making them the part of global value chain," Mr Sharma added.
The world's largest home furnishing player operates 336 stores in 44 countries; it sources textile, carpets and metal products from India.
The company would be investing about Rs. 4,200 crore to open 10 stores in the country in the first stage. The remaining Rs. 6,300 crore would be used to open 15 more stores.
Earlier, FIPB had approved IKEA's Rs. 4,200 crore out of a total of Rs.10,500 crore-investment proposal to open single-brand retail stores in India with only some categories of products allowed to be sold from a total of 33 that the company had applied for.
The finance ministry had previously ruled that the Swedish retailer, known for selling flatpack furniture and accessories, would not be allowed to sell items other than furniture such as food, textile products and office supplies, as it does in other markets.
Following this part approval, the company had made a representation to the industry department, which forwarded the request to FIPB seeking review. The company then resubmitted its investment proposal requesting permission to bring in its global business model, which has been approved in its entirety.
The government has presented IKEA's entry into India's retail market as a sign that foreign investors have kept faith with Asia's third-largest economy, at a time when GDP growth in the country has declined.
IKEA plans to cash in on India's growing urban middle class and strong demand for international brands and lifestyle products such as furniture.
With inputs from Reuters
RECOMMENDED FOR YOU
POPULAR
1
IMF Flags Tax Shortfall And Loan Delays As Challenges For Pakistan's $7 Billion Loan Package
2
CJI Sanjiv Khanna Calls For Minimum Remuneration And Security For Young Lawyers
3
Vaishnaw Calls For Fair Compensation For Media Content Used By Platforms
4
India Sends 425 Tonnes Of Food Aid To Suriname For Social Welfare Program
5