Shares in the retail sectors rose today ahead of a key meeting of the Union Cabinet in which they members will arrive on a decision regarding allowing 51% foreign direct investment (FDI) in multi-brand retail in the country.

The department of industrial policy and promotion of the India government has put forward a proposal to allow 51% FDI in multi-brand retail and 100% in single-brand retail in the country. Most union ministries are believed to have given their consent to the proposal and a decision is expected next week on the matter. The move will allow foreign players to bring expertise in logistics and investment, which could help address supply bottlenecks in the country.

According to a report, "India, with its growing $1.6 trillion economy, is seen as one of the last frontiers for a massive and modern supermarket sector aimed at hundreds of millions of middle class consumers who still shop in neighbourhood mom-and-pop stores."

The proposal includes a condition that at least 50% of the total FDI should be in back-end infrastructure. The government will only allow large deep discount stores in cities with population of more than 10 lakhs and only in states that allow FDI in multi-brand retailing.

According to government sources, the proposal has already been sent to the cabinet for final approval. Small scale retailers are opposing the move to allow large foreign firms to operate in the sector in the country as they believe that it will affect their business.

The Indian government now allows 51 percent foreign investment in single-brand retailers and 100 percent for wholesale operations. Foreign retailer shave long been asking the Indian government to allow more foreign investment in the sector.