IKEA invests billions in India

Featured - June 25th, 2012

Swedish furniture company IKEA will invest 1.5 billion euros ($1.9 billion) in India, in a move Indian policy makers see as a way to recover the country’s declining foreign investments.

Included in the investment is a the goal of opening 25 stores over the coming years and engagement with imports, exports, distribution, marketing and housing, the Wall Street Journal is reporting.

India’s foreign investment environment is clouded by regulatory uncertainties, slowing economic growth and stalled proposals to liberalize foreign ownership. Under the government’s mandate, foreign companies only own 51% of their Indian units and are required to source 30% inventory from small-scale local industries.

IKEA lobbied for a 100% ownership, which India gradually allowed in an attempt to promote the country as an attractive investment destination. IKEA has local ventures already in place in India, sourcing almost $450 million products from local suppliers in 2011, but keeping up with the 30% will be a challenge in the coming years, according to a statement from IKEA.

Retail experts say that IKEA will face competition in India from local furniture companies such as Lifestyle’s Home Centre, which has 12 superstores across India.

The investment also underlines the growing demand from developing countries than European markets. IKEA demand is “tremendously strong” in Russia and China.