Swedish companies, including furnishing major Ikea, on Friday said that the business climate in India is ‘non-favourable’ while bureaucracy in the country remains a big challenge for their growth.
According to a business climate survey conducted by the Swedish Chamber of Commerce in India, though the willingness of Swedish companies to invest in India remains high, 40 per cent of the 157 companies operating in India feel that “the current Indian business climate is non-favourable, a big jump from last year’s 28 per cent stating the same”.
The survey comes at a time when Ikea is planning to enter India with an investment of over Rs 10,000 crore. The company is, however, yet to announce the location for its first store.
The government allowed 100 per cent foreign direct investment (FDI) in the single-brand retail sector September last year and Ikea’s proposal is so far the largest in the sector.
Some of the well-known Swedish companies present in India are: Oriflame, Tetra Pak, Scania, SCA, Ericsson, Kunskapsskolan and Volvo.
A statement from the chamber said, “17 per cent (participants) are stating that major senior management’s time is spent on dealing with government authorities about application and interpretation of laws and regulations. 28 per cent state increased bureaucracy to be largest risk facing their business in India.”
According to the survey, number of Swedish companies incorporated in India has increased and 8 of 10 companies, that participated in the survey, have said that they are planning to increase their operational activities in the country.
The companies are also bullish on the Indian market with one out of two companies expecting that in the coming three years, the investment climate is likely to become more favourable.
Based on this optimism, 71 per cent Swedish companies said that they are planning to increase their local workforce by over 5 per cent in 2014.
However, “The perceived availability of workforce has significantly lowered from last year... Swedish companies are struggling with unskilled workforce both in white and blue collar,” the survey showed.
Also, 54 per cent respondents perceive Indian labour regulations to be problematic for their operations and growth.