Govt restricts what IKEA can sell in India - reports

The sign of an IKEA furniture store is seen in Berlin, November 16, 2012.

MUMBAI (Reuters) - The government has placed tight restrictions on what IKEA can sell in the country, in what would be the latest hitch for the furniture seller as it plots 1.5 billion euros expansion there, newspapers reported.

The finance ministry has forbidden IKEA from selling items including textile products and office supplies, cutting the number of product categories the company can sell to 15 from 29, the Economic Times reported.

The Sweden-based retailer was initially wary of entering India as it faced stiff local sourcing rules, which India later relaxed.

It was not immediately clear whether any further product restrictions would delay or alter IKEA's investment plans.

"IKEA is waiting for the formal notification of the details regarding the content of the latest approval from FIPB," an IKEA spokeswoman in India said on Friday, referring to the Foreign Investment Promotion Board, part of the finance ministry which clears investment proposals from international companies.

"We will have to look into the details and review what it means for us. We will be able to comment after that," she added.

The government has presented IKEA's planned entry as a sign that foreign investors have kept faith with Asia's third-largest economy, at a time when growth has declined and political protests have erupted over expansion by foreign firms.

India has thrown open its doors to foreign retailers this year, liberalising its investment rules to allow in global supermarket chains and as well as lifting an investment cap on single-brand retailers such as IKEA.

But the rule changes have provoked a furious backlash from some political parties and domestic retailers, a reaction which threatens to derail a package of pro-market reforms aimed at reviving growth.

(Reporting by Nandita Bose; Editing by David Holmes)