In bad news for global furniture and footwear brands like Swedish home furnishing multinational IKEA that aim to expand in India, the government on Saturday announced a raise in customs duty on imported footwear to 35 percent from 25 percent and on furniture goods to 25 percent from 20 percent.
The news comes at a time when state governments like Telangana are planning to set up dedicated industrial park for furniture manufacturing, and IKEA expanding to reach out to shoppers across e-commerce platforms, both online and offline.
The Furniture Park will come up over 100 acres of land on the outskirts of Hyderabad and will house various furniture manufacturers.
According to market consulting firm Deloitte, India’s e-commerce market is expected to grow from US$ 24 billion in 2017 to US$ 84 billion in 2021.
Changing its strategy for India, Swedish home furnishing multinational IKEA is now looking at a multi-channel approach with focus on ensuring accessibility.
On completion of one year of its first large format store in Hyderabad, the home furnishing retailer said that it would open stores across formats and start e-commerce journey.
After launching a store in Mumbai in August last year, the company launched its online store in Pune this month to reach out to more customers,
The furniture giant earlier announced plans to invest Rs 10,500 crore to open 25 stores by 2025.
In addition to big stores coming up in Mumbai, Bengaluru and Delhi, IKEA is also looking at opening small format stores.
Global footwear brands will face a hit after the customs duty hike. On footwear, customs duty has been hiked from 25 percent to 35 percent along with raw materials customs duty from 15 percent to 20 percent to protect labour-intensive MSMEs sectors.
The government said that the hike is keeping in view the need of the MSME sector.
Presenting the Budget 2020 in the Parliament on Saturday, Finance Minister Nirmala Sitharaman said that special attention has been given to put measured restraint on import of those items which are being produced by MSMEs here with better quality.
“The labour intensive sectors in MSME are critical for employment generation. Cheap and low quality imports are an impediment to their growth,” she said.
Harkirat Singh, Managing Director, Aero Club (maker of Woodland and Woods), told IANS that while this is a welcome move especially for a ‘Make in India’ brand like them, “it will marginally shake our production costings due to our dependencies on good quality/imported raw materials required for manufacturing the rough and tough shoes, Woodland is known for”.
Ishaan Sachdeva, Director, Alberto Torresi which is one of India’s leading footwear brands, told IANS that customs duty hike gives the Indian manufacturers an extra push to survive and compete with imported brands.
“The 35 percent of customs duty on imported footwear is back-breaking initiative for many. This is a sigh of relief for ‘Make In India’ brands but at the same time, those who manufacture products with imported raw materials may increase the price in the near future once the initiative gets implemented,” he said.
According to Dharmender Khanna, Head of Lotto brand, some of the challenges they face are maintaining multiple warehouses, streamlining multi channels of online and offline retail, high tariffs on imports, among others.
“The current import duty on footwear is 25 percent, which is on the higher side and any further increase in this will make India an unviable market for an international brand like ours,” Khanna said in an earlier media statement.