India foreign investment panels clears Ikea entry

NEW DELHI (AFP) - India's foreign investment panel has cleared a nearly US$2 billion (S$2.4 billion) plan by Swedish furniture giant Ikea to open its stores in the country as it seeks new markets for its flat-pack products.

Two months ago, the Foreign Investment Promotion Board rejected 15 of Ikea's 30 product lines, including food and textiles, underscoring the regulatory hurdles faced by foreign stores hoping to enter the Indian market.

But late on Monday, Commerce Minister Anand Sharma said the investment board had cleared the plan.

"This is a positive development," Mr Sharma said. "The government is committed to playing a constructive role in encourage foreign direct investment.

Ikea had told the Indian government the company must be allowed to retain its "global model" in India, retailing all of its products and running its in-store restaurants as it does in every country where it has operations.

Now, the Indian Cabinet must approve Ikea's proposal to set up its retail outlets in India, but clearance was expected to be forthcoming.

Mr Sharma said late last month "we accept their global model", and "we see no reason why their global model has to be changed in any manner."

Ikea's entry into India - it has pledged to invest US$1.9 billion in the coming years - is being closely watched as a test case for how a large foreign corporation negotiates India's complex rules and red tape.

The government in September announced a string of pro-market and investor-friendly reforms that relaxed or removed barriers to foreign retailers.

Ikea hopes to open 25 of its stores in India through a 100 per cent owned unit, Ingka Holding, as part of a wider push into emerging markets such as China and Russia.

Ikea could not immediately be reached for comment. But it had said last month it was "confident that the Indian government will support Ikea's application as per the Ikea concept".