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IKEA to Enter India, Invest 1.5 Billion Euros
Reuters | June 22, 2012 | 11:22 PM EDT
Swedish retailer IKEA, the world's largest furniture maker, is opening up in India, marking a crucial step for the Indian government whose policy flip flops related to foreign investment have damaged market confidence.
The company, known for huge stores selling flatpack furniture and accessories, said it would invest 1.5 billion euros ($1.9 billion) to open 25 stores in Asia's third-largest economy after initially balking at India's sourcing requirements.
IKEA's plans, announced by the Indian government after a meeting between the company's CEO and India's trade minister in Russia, could give a boost to the embattled government of Prime Minister Manmohan Singh, which was forced in December to backtrack on plans to allow in foreign supermarket operators.
While the government removed foreign investment caps in single-brand retail in January, it imposed a condition that foreign retailers source 30 percent from local small and mid-sized enterprises, dampening the enthusiasm of retailers for the plan.
"It's a baby step but it has definitely sent the right signal out ... The government is trying to convince international investors, India is still open for business," said Devangshu Dutta, consultant with Third Eyesight, a retail consultancy said.
The Indian economy which grew at its slowest pace in nine years has been badly hit by political roadblocks to economic policymaking battering corporate investor sentiment.
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