Why the fuss over IKEA's cafe?
One hundred per cent foreign direct investment is allowed in hotels and restaurants without approval of the Foreign Investment Promotion Board, a move meant to encourage tourism and food processing in the country. This is how Starbucks has entered in partnership with Tata Global Beverages. Those familiar with the deal say no FIPB approval was necessary nor obtained. So why is the government agonizing over IKEA setting up cafetarias at its stores? The objection seems to be to Swedish food marts which are attached to every IKEA store and sell stuff like flavoured candy, chocolate, frozen crayfish, saffron rolls, marzipan, cheese pies, ginger thins, sausages and so on. Each of them is named differently, but does that make the food mart a multi-brand retail store, when every package sports the IKEA logo?
The FIPB seems to have been punctilious in its objections. For instance, it has denied IKEA permission to buy old furniture not for re-sale but in exchange of its products, in a move to induce purchases. The Swedish corporation's plan to provide consumer finance has also been nixed. 'FDI in financial services is different,' says Arvind Mayaram, Secretary, Department of Economic Affairs and chairman of the FIPB. Foreign investment is allowed without limit in 19 kinds of financial activities, including hire purchase and leasing, provided certain conditions are met.
'You cannot enter multi-brand activity by undertaking single brand obligations,' says Mayaram when asked why 18 of IKEA's 30 products, including furnishings have been disallowed. But can private labels like Besta for storage products be considered separate brands, when they all stamped IKEA?
Mayaram says an expansive view would have been seen as 'non-application of mind.' He insists that there was no objection to IKEA's application from any of the ten ministries represented in the FIPB and there was unanimity on the laid out policy.
I am one of those waiting expectantly for IKEA to open shop. I like its simple and elegant designs that come at prices that do not blow a hole in the wallet. The furniture we get in India is either tacky or costs a packet. The industry cries for innovation. IKEA's arrival in India should not only help its Indian suppliers produce quality that can sit on shelves abroad, it can spawn copycats that will change the interiors of middle-class homes across the country. But given the prevailing anti-business mood, and an atmosphere where every move of the government is suspect, perhaps the FIPB is being wisely cautious than become the subject of another scandal.
More about Vivian FernandesVivian Fernandes is a senior journalist with nearly 30 years of practice, 19 of them in television, all of which he spent at TV18. Vivian’s last assignment was as executive editor of a book on India and China written by the founder of the Network 18 group, Mr Raghav Bahl. He has been an observer of Indian business and politics, and had reported on economic policy making as reporter, chief of Delhi bureau of correspondents and economic policy editor. Vivian has traveled abroad with Prime Ministers Narasimha Rao, Atal Behari Vajpayee and Manmohan Singh. He was also reported on the World Trade Organization’s trade talks from Cancun, Hong Kong and Geneva. He continues his association with the Network18 group, but not as an employee.
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