India’s Union Cabinet has agreed to enable 100% foreign direct investment (FDI) in single-brand retail without prior government approval.

The move to liberalise the FDI policy in the country aims to facilitate business development and allow greater inflows contributing to growth of investment, income and employment, according to the Press Trust of India.

The decision opens the doors for a host of foreign companies, including furniture retailer Ikea and US technology firm Apple.

“The move to liberalise the FDI policy in the country aims to facilitate business development and allow greater inflows contributing to growth of investment, income and employment.”

Under the existing policy, FDI up to 49% is approved under the automatic route, however, companies willing to set up 100% FDI in single-brand retail need to seek governmental permission.

Headed by Indian Prime Minister Narendra Modi, the Cabinet also relaxed sourcing norms for foreign single-brand retailers.

As per the amendments, overseas retailers now no longer require to meet the 30% local sourcing target by their Indian subsidiaries for an initial five-year period, provided they are doing so for their global operations.

In a statement, the news agency stated: “It has been decided to permit single brand retail trading entity to set off its incremental sourcing of goods from India for global operations during initial five years, beginning 1 April of the year of the opening of first store against the mandatory sourcing requirement of 30% of purchases from India.”

Once the five-year relaxation period is completed, foreign retailers need to adhere to the sourcing norms directly towards their local operations, on an annual basis.

PwC India partner Goldie Dhama was quoted by media sources as saying: “Allowing incremental sourcing undertaken by overseas group companies to be counted towards the 30% sourcing commitment for the initial five years will provide single-brand retail trading companies the flexibility and time to align their retail and sourcing business.”