India pushes Ikea for more local cooperation

NEW DELHI - Agence France-Presse

Customers relax on a sofa in the Ikea store in Aelmhult, Sweden, in this file photo. AFP photo

A dispute over sourcing regulations is clouding plans by Sweden’s Ikea to open 25 of its trademark blue-and-yellow stores in India as it seeks new markets for its flat-pack furnishings.

Ikea last month asked India for permission to launch retail operations in India, promising to invest $1.9 billion over the coming years -- part of a broader push into emerging markets including China and Russia. Ikea’s request gave a boost to India’s government which hailed it as a sign that global investor confidence “is still intact” despite a sharply slowing economy, a slew of corruption scandals and suffocating red tape.

 But now New Delhi’s insistence that the world’s biggest furniture retailer source 30 percent of its supplies from small Indian manufacturers has become a sticking point. India defines a small business as any firm whose plant investment does not exceed $1 million. But Ikea says small firms would fast outgrow the cap after they started supplying the Swedish giant and become much bigger players.

“Small industries need to be allowed to grow and develop,” Ikea spokeswoman Josefin Thorell told AFP by email late last week, adding it was important that the definition of small industry provide “flexibility”. Ikea says suppliers should continue to qualify as small businesses even after they exceed the investment ceiling. It has asked that its compliance with the sourcing target be calculated over a 10-year span rather than one year, saying it would be “impossible for the Ikea Group to meet this requirement from day one.”