As it stands multinationals can invest up to 51% in single brand retail but foreign investment in multi-brand retail is not allowed. International grocery brands have been restricted to setting up cash-and-carry operations rather than supermarket chains.

Retail deregulation

A report published by the Department of Industrial Policy and Promotion (DIPP), and backed by influential FICCI, provides evidence that government appears willing to push for deregulation.

Depending on the results of stakeholder consultation - objections can be made up to July 31st - the sector could be opened, allowing somewhere between 49% and 51% foreign investment.

Protecting Mom and Pop

Opening the sector is politically sensitive. 33 million people - the countries biggest employer after farming - work in traditional Kirana stores. Job losses are feared.

RP Singh of the DIPP is clearly aware of the balancing act that is required:

"We want to approach FDI in retail with some amount of caution, participating should happen in a calibrated manner, for which domestic industry needs a cooling off period of three years."

To ease fears, the report suggests that 50% of new jobs could be reserved for youngsters from rural India. It also highlights the fact that organised and unorganised single-brand retail coexists successfully in China.

Making the case for big retail

Government has carefully crafted the paper. They make the point that farmers and the consumer will benefit as back-end infrastructure improves due to fresh capital investment.

The report states that farmers currently receive just one-third of the actual store price for produce, compared to two-thirds in more developed markets. In addition, DIPP estimate that R's 1 trillion of fresh produce is spoiled each year due to poor cold storage.

A significant moment for market reform

The tone of the report will provide hope to international retailers. Government has grasped the nettle by addressing popular concerns and fears with persuasive arguments. The report potentially signals a significant moment in retail reform.