FE Editorial : Accommodating Ikea
The Financial Express: Nov 22 2012, 01:13 IST
A commitment from a leading global player to invest over Rs 10,000 crore over a period of time—with R4,200 crore in the first phase—cannot but encourage other multinational retailers from wanting to do business in India. What’s creditable is that the government ceded ground to the company on points where it made little sense to have differences. Ikea was particularly keen that it should not be forced to source goods from medium and small enterprises (MSME) of a specific size—defined by the value of plant and machinery of $1 million—since once the MSME was brought up the curve and made the necessary investments, it would no longer be eligible under the $1 million norm. In the event, the government has done well to simply say it is ‘preferable’ that retailers buy from MSMEs. That should go a long way in lifting the comfort level for other prospective entrants to the Indian market as should the fact that the timelines for complying with the mandated 30% sourcing from MSMEs have been eased. Indeed, putting too many restrictions on foreign retailers, especially single-brand players, can be counter-productive. It’s true that Ikea will not be setting up 50 stores—over time, it may have just two dozen outlets across the country. But India is going to be a strategically important for the Swedish furniture maker and the potential for Indian vendors to supply to the company would be enormous, whether for sales in the home market or in other countries—Ikea, for instance, has
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