'No meatballs' as IKEA hits hurdles in India

NEW DELHI - Swedish retailer IKEA said Friday it was reviewing sweeping curbs imposed on what it can sell at its planned new stores in India that will reportedly prevent it offering its famed meatballs.

India's foreign investment panel has rejected 15 of IKEA's 30 product lines, a report said on Friday, underscoring the regulatory hurdles faced by foreign stores who are eyeing the Indian market with renewed interest.

"We are now internally reviewing the details (of the investment board's decision)," an IKEA spokeswoman told AFP, adding that she could not confirm the curbs as reported by The Economic Times on Friday.

Among the lines IKEA has been told by the Foreign Investment Promotion Board that it cannot sell are gift items, fabrics, books, toys, consumer electronics and food, the newspaper reported.

The group will, however, be allowed to sell furniture - its core business.

The investment panel also reportedly told IKEA it cannot offer customer financing schemes because that would violate banking regulations, or open cafes and food markets because that would break food policy regulations.

IKEA's entry into India - it has pledged to invest US$1.9 billion in the coming years - is being closely watched by competitors as a test case for how a large foreign corporation negotiates India's byzantine rules and red tape.

India's government announced a string of pro-market and investor-friendly reforms in September that relaxed or removed barriers preventing foreign retailers from operating in the country.

IKEA hopes to open 25 of its trademark blue-and-yellow stores in India through a 100-per cent owned unit, Ingka Holding, as part of a wider push into emerging markets like China and Russia.

The government initially insisted that IKEA obtain 30 per cent of its supplies from small Indian manufacturers that the Swedish retailer feared would not be able to keep pace with demand.

Later the government dropped the demand specifying the size of the supplier, but kept the 30 per cent local sourcing requirement.