India may tweak SME definition for IKEA investment | business | Hindustan Times
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India may tweak SME definition for IKEA investment

The Indian government may change the definition of small and medium enterprises (SME) to facilitate investments from Swedish furniture giant IKEA, Commerce and Industry Minister Anand Sharma said on Saturday.

business Updated: Aug 05, 2012 17:24 IST

The Indian government may change the definition of small and medium enterprises (SME) to facilitate investments from Swedish furniture giant IKEA, commerce and industry minister Anand Sharma said on Saturday.

"Definition of SME may require a change," Sharma, who is on an official visit to Sri Lanka, told reporters when asked whether the government would tweak policy to facilitate investments from IKEA.

IKEA is the world's largest furniture maker and has announced $1.9 billion (Rs 10,500 crore) investment for opening 25 retail stores in India.

However, the Swedish firm has been pressing for changes in regulation before the actual investment is made. It has called for change in definition of SMEs.

Under the current norm, firms with an investment of upto $1 million are considered SMEs.

If IKEA opens its store in India, it will be required to source a particular amount of materials from small and medium enterprises.

The Swedish firm argues that once it starts sourcing from an SME, the profit and size of those firms might grow rapidly and as a result it might not be considered an SME.

Sharma said the Department of Industrial Policy and Promotion (DIPP) was working on the issue and would bring more clarity on it soon.

"We have to remember that policy evolution is a continuous process. The policy has just been put in place and now we are learning about it," he said.

The minister emphasised that any firm cannot be "punished" for performing well. Small and medium enterprises enjoy several incentives from the government.

"The concerned departments will discuss it. What I am saying is you cannot punish an SME for performing well. This is the issue that is being discussed," he said.