22.1.13

IKEA gets FIPB nod


Bowing to pressure, the government reworked its earlier decision and allowed Swedish furniture maker IKEA to invest over Rs 10,000 crore in opening stores and cafeterias, setting the stage for the largest foreign investment in the retail space.
The decision by the Foreign Investment Promotion Board (FIPB), which will have to be endorsed by the Cabinet Committee on Economic Affairs (CCEA), comes days before finance minister P Chidambaram and commerce & industry minister Anand Sharma court international investors. While Chidambaram is headed for road shows in Asia and Europe, Sharma will meet bosses of Walmart and Tesco and other foreign investors in Davos later this week.
Unlike IKEA, which will enter through the single-brand window, the two British and US retailer are looking at the multi-brand model, where 51% foreign direct investment was allowed recently. In case of single-brand retail, 100% FDI is allowed.
Earlier, the FIPB had allowed IKEA to set up shop but was against allowing it to open cafeterias inside its outlets known for selling ready-to-assemble furniture. But following repeated requests, the commerce & industry ministry pushed the Swedish retailer’s case, prompting a rethink in the government. The entire investment will, however, not flow in immediately and will trickle in over 15-20 years.
Opening up retail trading to foreign players, a politically sensitive move, is among the most crucial steps taken by the UPA government over the last four months as it tries to win back investor confidence and ensure that foreign flows keep flowing in and help fund the current account deficit, which was estimated at 5.4% of GDP in the last quarter, against the comfort level of 2.5-3%.

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