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Corporate Nov 23, 2012

Govt’s approval for Ikea is not even half-hearted

By Firstbiz Editors

If one were to ask whether Ikea really got an approval from the Foreign Investment Promotion Board for its India entry, the answer will be both yes and no.

For, Ikea's in-store cafs are not the only ones that have been blocked by the Indian authorities.

Of the products list submitted by the Swedish furniture major, not even half have got the government's approval for sales in India.

Of the products list submitted by the Swedish furniture major, not even half have got the government's approval for sales in India. AFP

According to a report in the Business Standard, of the 30 products that Ikea wanted to sell, only 12 have got the board's approval. The remaining 18 have been struck off the list.

The company is reviewing the details of the FIPB order, according to the report.

It has said it would comment only once more clarity emerges.

According to the report, the approval has been given only to sell its core furniture products.

So will this prompt the company to review its India entry decision altogether?

Likely. Because, Ikea typically sells its full product range in whichever market it has forayed into, the BS report says, quoting industry sources.

With the government disallowing sales of more than half of its products, like home and office solutions; cleaning products and accessories; and children's products, the company's India-customised stores are likely to be just a shadow of their original ones.

Now, the billion dollar question. Will the government's stance impact the plans of other foreign players? In all likelihood it will, because for most of them the Ikea affair is a litmus test of sorts.

And the government's stance that Ikea can sell furniture, but not other products under the same brand, defies all logic.

However, your wait for the Ikea armchair is likely to get longer.

by Firstbiz Editors

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