India to free up retail sector to foreign investors: Report

India will move to open up the multi-brand retail sector and allow foreign direct investment up to 51%, with at least half the funds invested in infrastructure such as cold storage, newspapers reported on Friday.

Global retailers such as Wal-Mart Stores, Carrefour, Tesco and Metro AG have long sought greater access to a fast-growing but restrictive Indian retail sector that is dominated by mom-and-pop operators.

An inter-ministerial group headed by Kaushik Basu, chief economic adviser in the finance ministry, has recommended allowing foreign direct investment in multi-brand retail to tame inflation and cut farm gate and retail price differences.

His recent comments gave a strong signal that a decision could be made soon to open up the USD 450 billion retail sector to foreign investment, though it has been pending for years and faces strong political opposition.

India currently allows 51% FDI in single-brand retail and 100% in wholesale cash-and-carry operations.

The commerce and industry ministry has floated a proposal to open the supermarket sector by 51%, the Mail Today reported on Friday.

The Hindustan Times reported that retailers will have to source at least 30% of manufactured items from smaller companies and sell one third of their goods to small retailers.

The proposal is expected to move to the cabinet shortly for a formal approval, the Hindustan Times said.

R.P. Singh, industry secretary, declined to comment when asked about the reports.