Business India

In: Business and Management

Submitted By nexus9900
Words 331
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KEA wants 10-year window to implement sourcing rules

* India says the time period is "too long": source

* IKEA plans to invest 1.5 euros billion in India

By Matthias Williams and Niklas Pollard

NEW DELHI/STOCKHOLM, July 6 (Reuters) - India has rebuffed a request by IKEA to relax rules on buying goods locally, a government source said on Friday, raising the prospect of a delay in the world's largest furniture maker entering the Indian retail market,

IKEA, famous for its self-build flatpacks and huge stores, said last month it would invest $1.5 billion euros ($1.86 billion) and open 25 outlets, throwing a lifeline to the government in India where economic growth has slowed sharply.

But the Swedish company sought a 10-year window to comply with rules that foreign retailers source 30 percent from local small and medium-sized firms, a requirement which overseas companies say discourages investment.

When contacted by Reuters, IKEA said a short delay in its formal application to enter the Indian market would not affect its decision to open stores, and hoped to start operations soon.

The stakes are high for both sides.

India offers IKEA a huge new market while the government is battling heavy criticism over its management of Asia's third-largest economy where growth has slipped to its weakest pace in nine years.

Prime Minister Manmohan Singh said on Friday that IKEA's planned entry was proof that investors still had confidence in India.

WINDOW

A government source involved in formulating retail policy called IKEA's proposed phase-in period "too long".

"They'll rework it, I'm sure," the source said, speaking on condition of anonymity because of the sensitivity of the matter.

An IKEA spokesman said the time period to implement the sourcing rules was "not set in stone".

The requirements underscore the potential pitfalls for foreign…...

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