The proposal will now have to be cleared by the Cabinet Committee on Economic Affairs as investment applications worth more than Rs. 1,200 crore need the cabinet approval.
These were mostly on the lines pointed out by IKEA which wanted the government to tweak a clause that will require it to source 30% of the value of goods sold in India from small industries whose investment do not exceed Rs. 5.5 crore.
In September, the government had dropped the "mandatory" sourcing clause by asking retailers to source 30% of their merchandise from India, "preferably" from Indian small enterprises. It also dropped the $1 million ( Rs. 5.5 crore) upper limit for investment for defining small enterprises.
Economic affairs secretary Arvind Mayaram confirmed that FIPB has approved the proposal on Tuesday.
IKEA's would be the largest investment in the single- brand retailing ever since the government has allowed 100% FDI in this sector in January.