Scandinavian furniture retailer IKEA, which has been waiting to set up shops in India independently, today said the 30 per cent local sourcing clause applied for 100 per cent FDI in single brand retail might be difficult to live up to.
“We have found that the conditions applied to local sourcing from SMEs might be difficult for us to live up to,” the Group’s spokesperson in the country told PTI.
Earlier this month, government had notified 100 per cent FDI in single-brand retail paving way for global retail chains like IKEA and others to have full ownership and control of their India operations.
However, in respect of proposals involving FDI beyond 51 per cent, the mandatory sourcing of at least 30 per cent would have to be done from the domestic small and cottage industries.
Just two months back, the company was almost on the verge of announcing its foray into the Indian market but had deferred it following uncertainties due to political opposition to the government’s decision to relax FDI norms in retail, including 51 per cent in multi-brand retail.
When asked if IKEA had shelved its India entry plans, the spokesperson said: “No, India is still a very interesting potential retail market for the IKEA Group but we need to understand what the guidelines will mean for us.”
IKEA is, however, optimistic and hopes to be able to present more information shortly about its possibilities to establish retail operations in the country once the conditions are right, she said.
“India is since long a strong and growing purchase market for IKEA,” she added.
The furniture retailer has been adopting a wait and watch policy to open its stores as it wanted to operate on its own.
The firm also supports Unicef’s water and sanitation programme in India and funds programmes in the carpet and cotton regions in India.
In 2010, IKEA’s sales increased to €23.1 billion, an increase of 7.7 per cent compared to the previous year, with Asia and Australia contributing about 6 per cent.
The Group has operations in 41 countries with 29 trading service offices in 25 countries, according to its website.