06/16/2009, 00.00
INDIA
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No place for Ikea in India

by CT Nilesh
The plans of the Swedish giant to enter the Indian market failed. The norms for foreign investments that obligate at least a 49% investment by a local partner has forced them to postpone their plans for the opening of what would have been the first of 25 outlets, to an undefined future.

Mumbai (AsiaNews) - IKEA, the Swedish giant, has decided to postponed its entry in the Indian markets to better times. They started off in this Asian country by hiring 25 people and they were planning to open their first outlet in a location between Delhi and Gurgaon. It would have been the first of 25 showrooms all over India. They were encouraged by the perspective of a new stable government. However the existing laws (Foreign Direct Investment – FDI) are very restrictive regarding foreign investments; the country’s norms on foreign investments in retail sectors stipulate that the foreign company can hold no more than 51% stake and must have an Indian partner. Unfortunately IKEA was not able to find an Indian partner  with that much capital to put at stake and the Minister of Commerce, Anand Sharma, gives no hopes regarding changes in the FDI in the near future.

So IKEA has  no other option than to wait for better times.

IKEA’s distinctive and sprawling show rooms require high investments and this multinational has been unable to find an Indian partner who sees the need of investing in this sector. The Management staff of IKEA hoped that  rules would less restrictive with the coming of the new government, but now knows that these norms are not likely to be changed soon.

IKEA has already been sourcing many materials from India and employs around 11,000 people in this Asian country, added to which are other 60 thousand that it employs indirectly in related activities. The outsourcing business generated by IKEA in India is estimated to be around 350 million Euros.

Last year IKEA  achieved a turnover of over 21 billion Euros, sells furniture and products for homes, has more 300 outlets in around 40 countries. Founded in the year 1943 in Sweden by Ingvar Kamprad and is owned by a Dutch-registered foundation controlled by the Kamprad family. IKEA is an acronym comprising the initials of the founder (Ingvar Kamprad), the farm where he grew up (Elmtaryd) and his home parish (Agunnaryd).

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