SWEDISH retailer IKEA , the world's largest furniture maker, will set up shop in India after earlier balking at sourcing requirements, spending €1.5bn (£1.21bn/$1.9bn) to open 25 stores in Asia's third-largest economy.
IKEA's plans were announced by the Indian government after a meeting between the company's CEO and India's trade minister in Russia.
While the Indian government removed foreign investment caps in single-brand retail in January, it imposed a condition that foreign retailers source 30 per cent from local small and mid-sized enterprises.
"The mandatory sourcing clause that requires goods to be sourced from small and medium enterprises will remain a challenge," IKEA spokeswoman Malin Pettersson Beckeman said on Friday (June 22).
India said the company had discussed its reservations over the sourcing policy with the government.
"IKEA had certain reservations about sourcing norms which were discussed with the DIPP (Department of Industrial Policy and Promotion) officials; suitable answers of which were provided leading to the decision to invest," the Indian government said.
The company does not yet have any stores in India but sourced $450m (£289m) worth of goods from the country last year, a figure it aims to lift to $1bn (£641m) in coming years.
IKEA said its investment will be made over 15 to 20 years.
India's commerce ministry said IKEA will initially invest €600m (£483m) and a further sum of up to €900m (£724m).
