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India Opens Retail Sector to Foreign Supermarkets

Customers shop at a Best Price Modern Wholesale store, a joint venture of WalMart Stores Inc. and Bharti Enterprises, at Zirakpur, India, Nov. 24, 2011.

India's Cabinet has approved a plan to open up the country's $450 billion retail sector to foreign supermarkets, a reform that could unclog supply bottlenecks that have kept inflation high.

Ministers on Thursday gave the green light to a proposal to allow international firms to hold a 51 percent stake in multi-brand retailers. The Cabinet also decided to raise the cap on foreign investment in single-brand retailing to 100 percent from 51 percent.

Foreign retail giants like U.S.-based WalMart and France-based Carrefour have lobbied for years to be able to sell directly to consumers in India. Until now, the companies have only been able to run wholesale stores that supply small businesses.

But critics, including the country's main opposition Bharatiya Janata Party, say the proposal would cause job losses and drive smaller stores out of business.

India's Commerce Minister Anand Sharma said the details of the proposal will be discussed further in parliament on Friday.

Some information for this report was provided by AP, AFP and Reuters.