The Indian government has given its nod to foreign direct investment of upto 51% in the multi-brand retail segment.
Foreign multi-brand retailers such as Walmart, Tesco and Carrefore can now own upto 51% of their investments in India, paving way for their greater entry into the Indian retail market.
Strict regulations thus far allowed only wholesale joint ventures in the country.
Indian Prime Minister Manmohan Singh said the Cabinet has taken the decision to bolster economic growth and make India a more attractive destination for foreign investment.
"I believe that these steps will help strengthen our growth process and generate employment in these difficult times," Singh said.
The decision comes with conditions including: foreign retailers will only be allowed to set up in cities with a population of more than 1 million and mandatory sourcing of 30% of their requirement from small and medium enterprises.
Major retailers such as Tesco, Carrefour and Walmart, have been hoping to set up shops in India and welcomed the government’s policy directive.
In 2008, Tesco had invested £60m in a cashand-carry joint venture with Indian conglomerate Tata to gain a foothold in the country in anticipation of favorable changes in regulations
Wal-Mart India president Raj Jain was quoted by Reuters as saying that, "We are grateful that the government has realised and appreciated the value that we will bring to strengthen the Indian economy."