After a big bang entry into the Indian market, Swedish furniture retailer IKEA stands disappointed following Budget 2020, reports ET. The Finance Minister, in her Budget speech in the Parliament, said she is increasing import duty on various products including wooden furniture, tableware, kitchenware, toys etc. IKEA, which opened its first store in Hyderabad imports a majority of the items.
IKEA is 'disappointed' and has said it was evaluating the impact of the government’s move to raise import taxes.
In the case of kitchenware and tableware, the duty has been doubled while on toys, the increase is from 20% to 60%. Incidentally, IKEA sells some toys too.
The increase on furniture items is more moderate at 5% from 20% to 25%. IKEA’s main stay is furniture. The company may decide to partly absorb the increase and partly pass on to the customers. Where the duty increase is so high that it becomes unviable to compete, they may withdraw the products.
“We have a long-term and ambitious growth and investment plan and an open and stable policy regime is crucial for long-term investors,” is how IKEA India’s Chief Executive, Peter Betzel has reacted to the Budget and the import duty increases.
The Swedish company says they do have plans to increase their sourcing from India.
Foreign investors, when they make investments in any new market, expect a sense of stability. This means the duty and tax structures will remain within a certain range for them to work out the cost of their investments, profitability and also the ability of the business to stay the long haul. On the other hand, every country wants to protect its domestic industry.
Meanwhile, IKEA plans to open its second flagship outlet and two smaller version stores in Mumbai.