It has also tweaked the sourcing norms for FDI exceeding 50 per cent in single brand retail, requiring foreign firms, which want a relaxation of the 30 per cent procurement norms, to set up manufacturing facilities in the country.
After considering various aspects and discussions with various stakeholders and states, it has been decided to go ahead with the decision to allow 51 per cent FDI in multi-brand retail, Commerce and Industry Minister Anand Sharma told reporters after the Cabinet meeting chaired by Prime Minister Manmohan Singh.
"The response has been a mixed one but the UPA had tried to evolve a consensus," he said.
The cabinet had in November last year approved 51 per cent FDI in multi-brand retail but had to put it on hold due to opposition from political parties, including UPA ally Trinamool Congress.
Sharma also reiterated that foreign retailers planning to enter the multi-brand segment would have to invest a minimum of USD 100 million with 50 per cent of it in rural areas.
The Minister said the firms will also have to source 30 per cent of their products from Micro and Small & Medium Enterprises where FDI is 51 per cent and above.
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Under the norms, 50 per cent of total investment will have to be invested in 'backend infrastructure' within three years of the induction of FDI.
"As far as the urban areas are concerned, they will be allowed to open stores only in cities with a population of more than one million, while in the case of hilly states, it will be up to the respective state governments," Sharma added. (MORE)