Is IKEA finally ready to set up shop in India?

At a time when foreign investors are shying away from India, the world’s largest furniture maker IKEA wants to invest $600 million in the Indian retail market, raising existing sourcing in India to $1 billion, a trade ministry official said today.

IKEA had earlier expressed concerns about the conditions the government has placed on foreign retailers, including a requirement that they source at least 30 percent of their products from local companies. IKEA CEO Mikael Ohlsson was earlier this year quoted as saying while the outright ownership of operations granted to foreign single-brand retailers was “a very positive change”, the local sourcing rules were more easily met by food retailers than single-brand companies with established, global product ranges.

However, the Hindustan Times reported earlier this month that the government is drawing up plans to ease FDI norms , including the condition that global firms will have to source 30% of their requirements from local small firms and artisans.

This is seen as a clear sign that the Centre is paying heed to the criticism by business that restrictive policy environment is hurting India’s image as a global investment destination.

India currently allows 100 percent foreign direct investment in single-brand retail, up from 51 percent earlier, but bars foreign investment in supermarket chains.

Swedish major Ikea has sought government approval to set up a wholly-owned subsidiary in India.

IKEA CEO Mikael Ohlsson met Indian trade minister Anand Sharma in St. Petersburg, Russia, to discuss the investment. The official said the company, which had filed an application to start operations in India, would increase sourcing from the country to $1 billion.