On IKEA Opting Out Of India

I have always been a big supporter of allowing FDI into Indian retailing. Read my old ToI article on the side of liberty here.

I am therefore extremely disheartened to read the news that the great European furniture design company, IKEA, has shelved its plans to enter India. The nation has lost 1 billion dollars in FDI. For a poor country, this is extremely bad news. Poor countries need Capital, without which productivity cannot be raised. If productivity is not raised, wages cannot rise.

Why did IKEA opt out? According to the news report, the obstacles placed in its way by our The State were insurmountable. This included the stipulation that they must have an Indian partner. What nonsense! We already have many MNCs in India with Indian partners – and there is nothing much to say for them. Honda has for long been tied with Hero Motors and SIEL. And in insurance we have Tata- AIG and Bajaj-Allianz. These partnerships make no sense. In either case, they must not be forced by State policy. Remember, it is the Misuse of Force that must always be opposed. That is why the libertarian ideal is Liberty Under Law. If foreign firms operate under law, our The State should have nothing to complain about. Just collect the taxes, build the roads, and stay out of all our faces.

On IKEA’s operations in India, the news report says:

IKEA has been sourcing many materials from India and employs around 11,000 in this operation, while it claims to be indirectly employing another 60,000. This outsourcing business is estimated at around Rs 1,900 crore.

This figure could have quadrupled if Bharat Sarkaar did not operate as One Big Roadblock.

As I have always maintained:

Rukawatein Hatao, Gareebi Apnay Aap Hutt Jayegi.
Remove the obstacles. Poverty will vanish on its own.

In India, quality furniture is hard to find. And it is either hideously expensive or just hideous. IKEA furniture is based on classic Swedish design, good looking, and quite inexpensive. If a giant in the business like IKEA were allowed to enter the Indian market, there would be all-round gains – especially for the consumer. There would be even greater gains if the timber trade was left to market forces.

I visited an IKEA store in Germany. It was an eye-opener. The store was enormous. I went through each of the floors gaping open-mouthed at the many wonders on display – and the amazing prices at which everything was offered. I bought a few small knick-knacks because anything bigger would have been impossible to carry back on the aircraft. And I have two memories of the visit that I would like to share.

First: When I returned from my IKEA visit, my Frankfurt-based cousin Arpitha, with whom I was staying, asked me what I thought of the store.

I replied: I would like to tie a rope around the store and drag it to India.

Everybody in the house laughed. They all agreed with the sentiment. They said that whenever they visited a supermarket, this was their precise sentiment too: Tie a rope around the store and drag it to India, where nothing much is available.

Laugh about it – but do note that the politicians in Delhi do not share this sentiment. Of course, they shop-till-they-drop whenever they visit the West. An Indian diplomat once told me that much of his time was spent escorting Indian politicians around on their shopping expeditions.

What rogues!

Second: After having gone through all the floors of the IKEA store I finally landed on the top floor, where there was a self-service restaurant-café. It was lunch-time, so I took a tray and wandered around looking at all the goodies on offer. Finally, finding one meaty dish interesting, I asked what it was. “Venison,” replied the lady behind the counter. I had a double helping.

Yes, both timber and wildlife can be harnessed by market forces to benefit everyone. Today, both are under the control of Jairam Ramesh and the Forest Department.

What a waste!