January 11th, 2012
05:07 AM GMT
(CNN) – Nike, Starbucks and Ikea – the doors of India are now fully open to you.
Previously, under foreign direct investment (FDI) rules that limited single brand foreign ownership to 51%, foreign brands were required to partner with local investors.
Under the new rule passed by the government Tuesday, single-brand retailers like Marks & Spencer or Gucci can own 100% of their operations in India, according to a circular released by the Department of Industrial Policy & Promotion.
The move was the latest in the political battle over whether to crack open Asia’s third largest economy to greater foreign investment.
Rajan Bharti Mittal, managing director of Bharti Enterprises – which has a joint venture with Wal-Mart for “cash-and-carry” wholesale stores that sell to businesses – told reporters “this is a welcome move with a clear potential to lift the general mood in the economy.
“Increased investments by foreign single brand retailers will not only help improve consumer choice but also enhance competitiveness of Indian enterprises through access to global designs, technologies and management practices,” Mittal said.
Thursday’s move comes a little more than a week after India announced plans to further liberalize its stock market to foreign investors. Starting January 15, individual foreign investors will be able to buy as much as 5% of a company’s shares. Total shares owned by foreigners, however, will not be able to exceed 10% of a company’s capital, the Finance Ministry said.
Before only institutional investors and Indians living abroad were allowed to invest directly in local companies.
The Sensex, India’s benchmark index, fell 25% last year, making the bourse one of the world’s worst performing markets in 2011. While among the world’s fastest growing economies, India’s breakneck growth slowed in 2010, slipping to 6.9% in the quarter ending in September – its lowest growth rate in more than two years.
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