UPDATE 4-India Government Warms to Wal-Mart's Retail Push.

NEW DELHI, India sounded a positive note on Tuesday on opening up to foreign direct investment in the massive and politically sensitive multi-brand retail sector by global players like Wal-Mart (WMT.N) and Carrefour (CARR.PA).

India's retail sector is largely closed to foreign firms and favours small family-run stores, with 51 percent of FDI allowed only in the single-brand retail sector. Multi-brand retail is restricted to cash-and-carry or wholesale outlets.

Opening up the sector would ease massive supply bottlenecks that have contributed to keeping inflation stubbornly high in India.

Food Processing Minister Subodh Kant Sahai backed calls by Wal-Mart, the world's largest retailer, to open up parts of the tightly-regulated $450 billion retail sector and hoped this would happen next year.

"I am in favour of it because this will give market-driven farming to farmers," Sahai told reporters on Tuesday at an event attended by visiting Wal-Mart Stores Chief Executive Mike Duke.

India's Planning Commission also backed the proposal, Deputy Chairman Montek Singh Ahluwalia said on Tuesday.

"There is absolutely no reason why we shouldn't allow foreign direct investment," the powerful adviser told reporters.

Still, it is not the first time the government has hinted at relaxing the rules. Over the past few years the government has moved forward on reforms only to backtrack in the face of local opposition.

Wal-Mart, in partnership with India's top telecoms group Bharti Enterprise, operates four cash-and-carry outlets in India.

India, which along with China is leading annual economic growth among major economies, is increasingly a hot investment destination for global companies keen to tap into the massive, decentralised yet heavily regulated market.

Source : reuters.com