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Sharma Signals India to Approve Ikea in Push for Investment

January 03, 2013

Sharma Signals India to Approve Ikea as Nation Seeks Investment

Ikea, the world’s largest furniture retailer, is seeking to tap demand in the second-most populous nation, India. Photographer: Casper Hedberg/Bloomberg

India is poised to approve furniture retailer Ikea’s application to open stores as the nation seeks to lure more investment, Commerce Minister Anand Sharma said.

“It should go through,” Sharma, 59, said in an interview in his office in New Delhi yesterday. “There should not be any doubt in anybody’s mind.”

Ikea’s proposal to invest as much as 42 billion rupees ($773 million) in outlets selling items ranging from sofas and cutlery to hot dogs is awaiting a fresh approval from officials. The Swedish chain has sought clarification on whether it can sell the same types of products in India as overseas, posing a test of the nation’s commitment to implementing policy overhauls aimed at reviving inflows to boost a struggling economy.

“Our focus is on attracting foreign direct investment,” Sharma said. “2012 has not been an easy year for us, and we hope 2013 will be better because the decisions we have taken will lead to an increase in FDI.”

Prime Minister Manmohan Singh’s government in January 2012 allowed full foreign ownership of stores selling a single brand. Ikea, the world’s largest furniture retailer, is seeking to tap demand in the second-most populous nation.

“It is our understanding that we will hear back about the application next Monday,” Ikea spokeswoman Ylva Magnusson said by telephone yesterday. “Until we hear back from them, we cannot comment further.”

Spurring Growth

India’s ruling coalition in September permitted overseas retailers such as Wal-Mart Stores Inc. to set up multibrand supermarkets, part of a package of policy changes to spur growth. That step cost Singh his majority in parliament after some lawmakers said family-run stores will have to close.

The prime minister mustered enough support to win votes in the legislature in December on the plan to permit the entry of foreign supermarkets.

Sharma said retail liberalization is now “cast in stone.”

India’s Foreign Investment Promotion Board first approved Ikea’s application on Dec. 21, and it is being reconsidered after Ikea asked for more information.

The administration opened other industries, such as aviation, to overseas investors in September, as well as curbing fuel subsidies to pare a budget deficit that has increased the odds of a credit-rating downgrade to so-called junk status.

Shares in Jet Airways (India) Ltd. climbed as much as 6.7 percent today on reports that Abu Dhabi-based Etihad Airways PJSC may purchase a 24 percent stake in the Mumbai-based company, following the easing of aviation investment rules.

Foreign direct investment into India fell 42 percent to $14.8 billion in the seven months through October compared with a year earlier. The economy may expand as little as 5.7 percent in the fiscal year through March 2013, the weakest pace in a decade, according to the Finance Ministry.

To contact the reporter on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net;

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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