Prime Minister Manmohan Singh's beleaguered government won the vote in the upper house of parliament on Friday, two days after it had won a similar approval in the powerful lower house.
A loss would have been a major embarrassment for the government, but would not have stopped the measure from being implemented after the Cabinet in September decided to allow foreign companies to own 51 per cent stakes in supermarkets and other big retailers for the first time.
However, individual states will be able decide whether to let the retailers operate in their territory. So far, 10 states have said they will not allow big-box retailers in.
The opposition forced the government to seek a vote on the issue in parliament after stalling proceedings in the two houses for days last month.
Friday's vote came as a boost to Singh's minority government, whose image has been tainted by a series of bribery scandals involving several ministers.
Two powerful socialist groups, the Bahujan Samaj Party and the Samajwadi Party, bailed out the government in the face of a strong challenge from the main opposition Bharatiya Janata Party and its allies, including communist groups.
The policy, debated for years by political parties, will allow foreign retail chains to do business in India and enable the government to carry forward reforms that will shore up a slowing economy and bring in a fresh infusion of investment, which could also help farmers and small businesses.
Commerce Minister Anand Sharma said the measure would improve supply chains and would give Indian farmers new customers. At present, he said, 30 to 40 per cent of fruits and vegetables grown in the country rot in the field because of a lack of proper procurement and cold storage facilities, causing an annual loss of nearly 500 billion rupees ($9.2 billion).
However, opposition parties said the new policy will crush small retailers not able to withstand the competition from the global giants.
India will become a country of sales girls and boys where shops run by American and British companies will sell mostly Chinese goods, warned Arun Jaitley, a top opposition BJP leader.