The Indian government has approved proposals to allow 100% Foreign Direct Investment (FDI) in single-brand retail.

Single-brand retailers including Ikea and Louis Vuitton will now be allowed to own 100% of their stores but must source at least 30% of their products from domestic suppliers which have a maximum investment in facilities of $1m. Investment had been capped at 51% before now.

The decision was made by the Indian cabinet on November 24 and approved yesterday.

Plans to allow multi-brand retailers including Tesco and Walmart proposed by cabinet remain on ice.

Commerce and industry minister Anand Sharma said: “FDI in single brand has led to emergence of some global majors in Indian market. This will provide stimulus to domestic manufacturing value addition and help in technical upgradation of our small industry.”

The Department of Industrial Policy and Promotion said global design, technologies and management practices will be enhanced by the removal of the single-brand cap, which comes into force immediately.