Swedish home furniture retailer IKEA said at the weekend that it was preparing its responses for clarifications that the government has sought for its planned entry into India, maintaining that a short delay in its formal application to enter the Indian market would not affect its decision to open stores in Asia's third-largest economy.
"The process to evaluate everything from both parties takes time and short-term delay will not affect out intention to establish stores in India," the Stockholm-based company said in a statement that more information can be given if needed.
Government sources told HT no decision has yet been taken on easing norms specific to IKEA's application, but hinted that India was discussing plans to relax norms including the condition that global firms entering the local retail trade will have to source 30% of their merchandise requirements from local small firms and artisans.
The department of industrial policy and promotion (DIPP), which is piloting the policy, has begun discussions with other ministries, especially the ministry of small and medium enterprises (MSME), to ease the sourcing clause, an official said.
This is seen as a clear sign that the government was heeding criticism by businesses that a restrictive policy environment was hurting India's image as global investment hotspot.
IKEA's June 22 investment announcement, a significant commitment by a foreign investor, could also act as a cue for other global retailers.
Prime Minister Manmohan Singh told HT on Thursday that IKEA's planned entry was proof that investors still had confidence in India.
British footwear maker Pavers and IKEA are among the very few companies that have applied to set up stores in India after the new norms were notified in January this year.
The government bottled up multi-brand FDI last year but threw open single-brand retail Globally, single brand retailers follow 100% ownership.
IKEA wants India to tweak a clause that will require it to source 30% of the value of goods sold in India from small domestic firms whose capital investments do not exceed Rs. 5.5 crore. It wants even larger suppliers to be qualified as small. Such firms will very soon outgrow the stipulated valuation and become competitive medium to large set-ups, IKEA said.
IKEA also wants the compliance of this term to be calculated over a cumulative period of 10 years and not annually.
The department of industrial policy and promotion has sought details from the IKEA on "fulfilment of the sourcing conditions" which it is examining. "We are waiting for the government to respond to us," IKEA said.