The green signal given to Ikea, the Scandinavian do-it-yourself furniture giant, to set up its single-brand retail stores in India is a boost for the government. It will bring in total investments of `10,500 crore in two phases, with `4,200 crore planned in the first phase. It will send a signal to foreign companies that investments in single-brand retail are welcome, even if FDI in multi-brand retail appears to be stuck for now due to the ferocious political opposition it has evoked.
Three other foreign retailers — Pavers England, America’s Brooks Brothers and Italian jewellery brand Damiani — have already secured the necessary approvals to set up shop in India. In Ikea’s case, the government even bent over backwards to accommodate its concerns on having to mandatorily source 30 per cent of requirements from local small and medium enterprises. It changed “mandatory” to “preferably”.
Ikea had sought permission to set up its single-brand stores in India in June 2012, but in July it said it would be difficult to abide by the 30 per cent sourcing requirement. Ikea’s presence has been welcomed by domestic players as they feel it would give a boost to the estimated `1 lakh crore industry. Organised players hold barely six per cent of this market, and they feel the push Ikea is likely to give to the furniture market through advertising will impact the industry as a whole.