• Sweden edition
 
Ikea's India plans hit snag over sourcing issue

Ikea's India plans hit snag over sourcing issue

Published: 08 Jul 2012 09:55 GMT+02:00
Updated: 08 Jul 2012 09:55 GMT+02:00

Ikea last month asked India for permission to launch retail operations in India, promising to invest $1.9 billion over the coming years -- part of a broader push into emerging markets including China and Russia.

Ikea's request gave a vital boost to India's government which hailed it as a sign that global investor confidence "is still intact" despite a sharply slowing economy, a slew of corruption scandals and suffocating red tape.

But now New Delhi's insistence that the world's biggest furniture retailer source 30 percent of its supplies from small Indian manufacturers has become a sticking point.

India defines a small business as any firm whose plant investment does not exceed $1 million. But Ikea says small firms would fast outgrow the cap after they started supplying the Swedish giant and become much bigger players.

"Small industries need to be allowed to grow and develop," Ikea spokeswoman Josefin Thorell told AFP by email late last week, adding it was important that the definition of small industry provide "flexibility".

IKEA says suppliers should continue to qualify as small businesses even after they exceed the investment ceiling.

It has also asked that its compliance with the sourcing target be calculated over a 10-year span rather than one year, saying it would be "impossible for the Ikea Group to meet this requirement from day one".

India's media at the weekend reported government divisions over Ikea's bid for relaxation of the sourcing rules that critics say discourage overseas investment.

The sourcing stipulation is part of efforts by the centre-left government to defuse populist opposition to the entry of big foreign retailers in a country where small mom-and-pop stores dominate as well as to boost local industry.

India's Business Standard newspaper said the government body responsible for industrial development had agreed to tweak the rules to suit Ikea.

But the Times of India said the small business ministry opposed any dilution of the regulations on grounds it would hurt small enterprises.

Given Ikea's high-profile and Prime Minister Manmohan Singh's statement on Friday that he wants to make the country a "more business-friendly place", most analysts believe a compromise will be found.

Ikea, which in 2009 scrapped plans to enter the market due to regulatory concerns, says it has a "long-term vision" for India.

"Keeping in mind Ikea's stature, I'm sure the government will work out something," Saloni Nangia, president of retail consultancy Technopak, told AFP.

"Meeting the 30 percent sourcing target will take time -- Ikea just wants some latitude," she added.

Privately-held Ikea says it is "eager" to open stores in the country of 1.2 billion people but has set no target date.

It made its investment announcement after India allowed foreign retailers selling one brand to own 100 percent of their Indian businesses, instead of 51 percent, as part of moves to liberalise the sector.

Ikea sees huge potential in India's burgeoning middle class whose "wallet is still thin" but who want "inexpensive but nice home furnishings", Ikea chief executive Mikael Ohlsson told AFP on a scouting mission to India two years ago.

"It will be good for Ikea to have such a large market. Even with the economy slowing, the retail market has a strong future," said Technopak's Nangia.

Technopak estimates the retail market is generating sales of $470 billion a year -- of which only $27 billion comes from "organised retail" or chain stores.

Retail sales are seen hitting $675 billion over the next five years -- out of which $85 billion will come from chain stores.

AFP/The Local (news@thelocal.se)

Don't miss...X
Left Right

Your comments about this article

Today's headlines
Cops arrest 17 people for gang murder
Police at the scene. Photo: Niklas Luks/TT

Cops arrest 17 people for gang murder

Seventeen people were arrested during the early hours of Tuesday after a man was shot dead in central Sweden. Several of them were already known to the police for gang crimes. READ  

Swedish expert slams Norway terror alert
Terrorism expert Ranstorp and a policeman in Norway. Photos: TT

Swedish expert slams Norway terror alert

A Swedish terrorism expert has come forward criticizing the way Norway has handled its recent terror threat, saying the day the threat began was a "total problem in intelligence". READ  

Swedish nurse reported for patient 'death wave'

Swedish nurse reported for patient 'death wave'

A nurse in southern Sweden has been reported for abuse at a senior care centre after she allegedly waved to a colleague with the hand of a recently-dead resident. READ  

Pandas Plopp and Polly born in Swedish zoo
Plopp and Polly, the offspring of Pandora the panda. Photo: Kolmården

Pandas Plopp and Polly born in Swedish zoo

A pair of red panda cubs have been born in central Sweden, a wildlife park announced on Monday. READ  

Green Party ranked 'most gay friendly' in Sweden

Green Party ranked 'most gay friendly' in Sweden

The Green Party's views are 88.6 percent "LGBT-friendly", a Swedish LGBT rights group claimed on Monday, making the Greens the most gay-friendly of all Sweden's parliamentary parties. READ  

Man held on suspicion of murdering wife
Police on the scene. Photo: Johan Nilsson/TT

Man held on suspicion of murdering wife

Updated: Police arrested a man in Copenhagen on the suspicion of killing his wife, whose body was found at the couple's home in southern Sweden during the weekend. READ  

Arlanda, Stockholm
Lightning bolt grounds flight to New York

Lightning bolt grounds flight to New York

Swedes bound for New York learned on Monday morning that their plane had been cancelled after it was hit by lightning during Sunday's thunderstorm. READ  

Elderly Swedish man stripped of his 35 cats

Elderly Swedish man stripped of his 35 cats

The County Administrative Board of Skåne has decided to confiscate the 35 cats of an 81-year-old man who was forbidden from having more than nine of the furry felines. READ  

Wild weather set to strike Sweden anew
Photo: TT

Wild weather set to strike Sweden anew

With Sunday's thunderstorm reported as the worst of the year so far, Sweden is bracing for round two on Monday as meteorologists predict more of the same. READ  

Swedish youth suicides hit 25-year high

Swedish youth suicides hit 25-year high

Last year 1,600 people in Sweden took their own lives - and for Swedes aged 15 to 24, the numbers haven't been so high since 1989. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Gallery
People-watching, June 26th - 28th. Get inside Stockholm's hottest nightclubs
Gallery
Top ten Swedish taboos
Society
Seven-year-old Swede cycles to Berlin
Politics
'Gaza conflict needs help, not empty rhetoric'
Society
Swedes voted 'most beautiful' in the Nordics
Blog updates

27 July

Approaching Stockholm (Around Sweden in a kayak) »

"I woke up in the comfort of my own little cabin on Eva and Rolf’s boat, it was 7:30am and I was feeling a bit groggy after a couple of beers with all the lovely locals the night before. The previous day had really taken its toll on my body and I was very stiff and..." READ »

 

24 July

Sharing our Pride: Celebrating Love & the LGBT Community! (Stockholm in my American Heart) »

"It’s mid- July in Stockholm, and with much of the city on vacation, things can seem a little quiet – the streets, the bus, and the grocery store. One thing that has not paused for a summer break, though, is preparation for Stockholm’s Pride Festival, which will take place from July 28 to August 2...." READ »

 
 
 
Business & Money
Sweden demands EU clarity on Bitcoin tax
National
Swedish organic sales enjoy 'amazing' growth
Photo: Johan Nilsson/TT
Society
What's On in Sweden
Gallery
People-watching July 23
National
Swedish cops elect not to shoot 'angry elks'
Business & Money
New alcohol retail rules threaten micro-breweries
Gallery
People-watching Båstad
Business & Money
Sweden falls to third in global innovation index
Society
Swedish ornithologists keep webcam watch
Photo: Andreas Nordström/Image Bank Sweden
Gallery
Top ten Swedish beach hot spots
Tech
Swedish Wiki vet sets new content record
Photo: Fastighetsbyrån
Lifestyle
In Pictures: The Local's Property of the Week
Photo: Finest.se
Gallery
People-watching July 15-16
Photo: Ola Ericson/Image Bank Sweden
Society
What's On in Sweden
Photo: Lisa Mikulski
National
Hope springs eternal for expat pet shop owner
Gallery
Princess Estelle steals limelight at mum's birthday
National
Swedes risk infants' lives by covering up prams
National
Swede runs for office just using Bitcoin funds
Sponsored Article
Introducing... Your finances in Stockholm
Sponsored Article
Introducing... Housing in Stockholm
Latest news from The Local in Austria

More news from Austria at thelocal.at

Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Germany

More news from Germany at thelocal.de

Latest news from The Local in Denmark

More news from Denmark at thelocal.dk

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

729
jobs available
Swedish Down Town Consulting & Productions
Swedish Down Town Consulting & Productions is an innovative business company which provides valuable assistance with the Swedish Authorities, Swedish language practice and general communications. Call 073-100 47 81 or visit:
www.swedishdowntown.com
If you want to drink, that’s your business.
If you want to stop, we can help.

Learn more about English-language Alcoholics Anonymous in Sweden. No dues. No fees. Confidentiality assured.
AA-EUROPE.ORG/SWEDEN
PSD Media
PSD Media is marketing company that offers innovative solutions for online retailers. We provide modern solutions that help increase traffic and raise conversion. Visit our site at:
http://psdmedia.se