IKEA to shelve India retail plans, to continue sourcing

The world's largest furniture maker, IKEA, has shelved plans to enter the Indian retail market because of stringent FDI norms, but the company said it would continue sourcing supplies from the country for its international operations.     

The Sweden-based company said that it has shelved plans to foray into retail business in India until the government allows 100 per cent Foreign Direct Investment (FDI) in single-brand retailing in the country.     

"We would have liked the government to allow 100 per cent FDI in retail. As it is not forthcoming, we have stopped all plans for our retail business in India," an IKEA official said.     

"Our sourcing business has no links with our retail plans in India. The sourcing of goods and raw materials would continue from India," the official added.     

The company has been active in India for two years and is in sourcing business that is worth around Rs 1,800-1,900 crore, the official said.     

He said the company has a policy of not operating retail chains through Joint Ventures or other routes.     

On reports that IKEA had planned to invest up to around $1 billion in the Indian market, the official said: "We had made some plans internally and the government is aware of them."

IKEA's decision to shelve plans for opening retail chain have come on the heels of this week's report by the Parliamentary Standing Committee on Commerce, which has opposed further opening up of the organised retail market to foreign players.     

Under the existing rules, foreign investment of up to 51 per cent is allowed in single-brand retail, while for wholesale cash-and-carry business, 100 per cent FDI is allowed. No FDI is currently allowed in multi-brand retail business.      IKEA reported global sales of 21.2 billion euro in 2007-08 and has around 300 stores in over 35 countries.