• 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)

Your comments about this article

Today's headlines
National
Swedish town 'like Venice' after heavy rains
Photo: TT

Swedish town 'like Venice' after heavy rains

Torrential rains in western Sweden have left some towns submersed as water levels have risen to 1.5 metres above normal for the season with forecasts indicating that is worse to come. READ  

Ebola crisis
Sweden pledges new aid to UN Ebola fund
Photo: TT

Sweden pledges new aid to UN Ebola fund

Sweden has offered a new sizeable contribution to the fund set up by UN chief Ban K-moon to fight the Ebola outbreak. READ  

Society
'Dark forces' target refugee hunting scheme
Photo: Lars-Göran Thuresson/Älgriket

'Dark forces' target refugee hunting scheme

The Swedish hunting association runs a project to encourage young asylum-seekers to learn about hunting, a move which has proved controversial among some far right groups. READ  

Business & Money
American sales squeeze Ericsson profits
Ericsson CEO Hans Vestberg presents the third-quarter earnings report at the company's headquarters in Kista. Photo: Janerik Henriksson/TT

American sales squeeze Ericsson profits

Swedish telecoms equipment maker Ericsson reported a decline in net profit in the third quarter despite an increase in sales, boosted by business in emerging markets. READ  

Interview
'Too many concerts feel the same'
Sofar hosts secret gigs in Swedish apartments. Photo: Sofar

'Too many concerts feel the same'

Kattis Bjork founded Stockholm's secret gig scene - Sofar - a year ago. The Local caught up with her as she prepared to celebrate the project's anniversary this weekend and revealed the concept will spread to other Swedish cities in 2015. READ  

Stockholm 'sub hunt'
Sweden calls off suspect submarine search
Ships are returning to shore in Sweden. Photo: TT

Sweden calls off suspect submarine search

The core search for a suspected foreign vessel in Swedish waters has been called off. The armed forces said they remained convinced foreign underwater activity had taken place but had not identified an intruder. READ  

Business & Money
US and Japan fuel surge for Volvo trucks
Ed Carbaugh prepares to install parts on a truck engine on an assembly line at Volvo Trucks' powertrain manufacturing facility in Hagerstown, Maryland, March 2014. Photo: Patrick Semansky/AP

US and Japan fuel surge for Volvo trucks

Sweden's Volvo, the world's second-largest maker of trucks, said Friday it saw a spike in profits in the third quarter, boosted by thriving sales in the US and Japanese markets. READ  

Inspectors attacked at rogue doc’s surgery
Cigarettes and beer photo: Shutterstock

Inspectors attacked at rogue doc’s surgery

Inspectors who were sent to shut down a doctor’s surgery in Gothenburg were physically attacked and fled the premises to get help from the police. READ  

Police turn Swede’s vodka into water
A Swede loads a car with alcohol in northern Germany. File photo: Drago Prvulovic/TT

Police turn Swede’s vodka into water

Swedish police say they will pay a man 16,000 kronor ($2,200) in damages after much of the alcohol they confiscated from him was stolen, while many of the bottles they returned were filled with water. READ  

Diplomacy
US to get first female ambassador in Sweden
File photo: Athena Center for Leadership Studies

US to get first female ambassador in Sweden

The United States Embassy in Stockholm is set to get its first female ambassador after the White House announced it was nominating the Iranian-American ex-investment banker Azita Raji to take over from Mark Brzezinski. READ  

RECEIVE OUR NEWSLETTER AND ALERTS
Lifestyle
What's On in Sweden: October 24th - 31st
Gallery
People-watching: October 22nd
Gallery
In Pictures: Prince Carl Philip and Sofia Hellqvist
Lifestyle
Eight things to love about renting a Swedish apartment
National
Vasa ship cannon blasted in Sweden
Blog updates

24 October

Editor’s blog, October 24th (The Local Sweden) »

"Hi readers, Get ready to read our weekly digest of Swedish news in less than 60 seconds. The..." READ »

 

24 October

Is darkness weather? (Blogweiser) »

"I try very hard not to talk about the weather. This has come after a decade..." READ »

 
 
 
National
Sub hunt: Day-by-day
National
Sub hunt: Stockholm islanders share their fears with The Local
Sponsored Article
The best options for oversea transfers
National
Get 20% off unique Swedish homeware
National
Dentist gives free care to Roma beggars
Business & Money
Get your own office in Gothenburg or Stockholm - free for a day
Gallery
Property of the week: Malmö
Gallery
PHOTOS: 'Foreign activity' in Swedish waters
Gallery
People-watching: October 19th
TT
Society
QUIZ: How good is your Swedish?
Lifestyle
What's on in Sweden: October 17th - 24th
Society
The nudity... and nine other things expat men notice in Sweden
Gallery
People-watching: October 15th
Gallery
Your views: Should outdoor smoking be banned in Sweden?
Business & Money
Sweden has 'large hole' in finances
Sponsored Article
Introducing... Finding a job in Stockholm
Society
Monster salmon caught in northern Sweden
Gallery
Property of the week: Lorensberg
National
Scandinavia's child bride
National
Ebola crisis: How is Sweden preparing?
Business & Money
How Sweden is becoming a cashless society
Gallery
Stockholm Burlesque Festival 2014
National
How a little red horse became a symbol for Sweden
Gallery
People-watching: October 12th
Business & Money
The hottest start-ups from southern Sweden
National
What's on in Sweden: October 10th - 17th
National
Stockholm is 'best' region for well-being
Gallery
People-watching: October 8th
National
Five facts to know about Patrick Modiano
Society
My Swedish Career: A French fashionista in Sweden
Society
Swede's anti-bully Facebook tale goes viral
Society
Have you seen Sweden's viral subway cancer campaign?
National
Isis: Swedes linked to Turkish prisoner swap
National
Should Swedes be banned from buying sex abroad?
Gallery
Fredrik Reinfeldt's leaving presents
National
Five Swedish TV shows you shouldn't miss
Gallery
A tool belt, a casserole, and a book. Fredrik Reinfeldt's parliament gifts
TT
Lifestyle
Top five winter festivals in Sweden
TT
National
Sami reindeer herders win mine reprieve
Gallery
Property of the Week: Gamla Enskede
Sponsored Article
How to catch the first lobster of the year
Team SCA
Sponsored Article
All-female SCA team takes off on Volvo Ocean Race
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

974
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
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
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