Clothing retailer Zara Holding's application to set up a joint venture for foreign direct ownership in single-brand retail in India has been rejected by the Foreign Investment Promotion Board (FIPB).

Netherlands-based Zara Holding planned to set up a joint venture with 51% foreign equity participation to introduce its Massimo Dutti Brand in India.

The rejected venture would have been with Trent, Tata Group's retail division, according to Reuters.

In January, the Indian government agreed to allow 100% foreign direct ownership in single-brand retail. The announcement was aimed at attracting investments in production and marketings, improving the availability of goods, encouraging increased sourcing of products from India and enhancing the competitiveness of Indian companies.

The agreement stated that the foreign investor should be the owner of the brand. However, the Massimo brand is owned by Inditex and not Zara.

When contacted by just-style today, Inditex said: "Inditex Group is processing a joint venture to incorporate the Massimo Dutti brand to India. At this stage, the group is on its way to present the administrative requirements to create the company."

The proposals to extend FDI in single-brand retail were originally part of wider plans to alter the rules in multi-brand retail but were suspended in December 2011 after facing opposition from government allies.