NEW DELHI/MUMBAI (Reuters) - India's foreign investment board cleared IKEA's proposal to set up stores in the country, Trade Minister Anand Sharma said, paving the way for it to invest $1.86 billion there over 15-20 years.
The finance ministry had previously ruled that the Swedish retailer, known for selling flatpack furniture and accessories, would not be allowed to sell items other than furniture such as food, textile products and office supplies, as it does in other markets.
However, the company resubmitted its investment proposal requesting permission to bring in its global business model and a government source with direct knowledge of the matter told Reuters on Monday that the company's investment plan had been approved in its entirety.
"The government is committed to play a constructive role in encouraging FDI (Foreign Direct Investment) specially in areas which create jobs and provide technological advancement," the Trade Minister's statement said.
IKEA's investment plan will now be sent to the Cabinet Committee on Economic Affairs (CCEA) for final approval.
"We do not have any formal response from the government on the approval and the application is still under process ... We are positive the Indian government will give us final approval," said IKEA spokeswoman Josefin Thorell.
The government has presented IKEA's entry into India's retail market as a sign that foreign investors have kept faith with Asia's third-largest economy, at a time when GDP growth in the country has declined.
IKEA plans to cash in on India's growing urban middle class and strong demand for international brands and lifestyle products such as furniture.
($1 = 53.8150 rupees)
(Reporting by Rajesh Kumar Singh in New Delhi and Nandita Bose in Mumbai; Editing by Tony Munroe and Helen Massy-Beresford)