If you are Ikea or Starbucks and you wish to open stores in India, the government currently requires you to find a a local investment partner who would own 49 percent of the India business. Companies ranging from Reebok to McDonalds have entered the India retail market under these terms but many others have held back. This quarter there is news that India is seriously considering permitting 100 per cent foreign direct investment in single-brand retail.
India’s Commerce minister Anand Sharma said that IKEA had asked the government to hike FDI limit in single-brand retail. “IKEA sources almost 30 per cent of its products from India. It will create jobs in India. The government is considering it.”
Note that this does not affect “multi-brand retail” such as Wal-mart, Tesco or Best Buy. It is also unclear if the change considered in a one-time exception for Ikea, if anyone sourcing from India will be granted the same terms or if there is a general rollback to permit 100 percent foreign investment in all single-brand retail.
