The Indian government has cleared the way to allow multinational retailers including Tesco, Carrefour and Walmart to enter its retail market.

The Indian cabinet has cleared a proposed deal to allow 51% foreign direct investment (FDI) in multi-brand retail, allowing multiple store international retailers to trade.  

The move follows year of debate on the subject since FDI was first allowed in the 1990s. The cabinet also cleared a 100% FDI in single-brand retail. 

Rakesh Biyani, ED of the Future Group told NDTV, he expects better supply chain efficiencies, transfer of technology and lower prices in the $450bn because of the move.

But Planet Retail analyst Manu Ghai said there is still a long way to go in clearing the deal. She said: “The issue is very politically sensitive and we have seen similar announcements in the past. There are 12m traditional stores at stake and you cannot ignore them as they are voters.

“If it were to happen, the first thing any established retailer would do is to start up large-scale hypermarkets to establish economies of scale and get dominance in the market.”

Ghai said the nation’s mindset is turning towards western retail structures due to increased travelling by Indian citizens.

Carrefour, Tesco and Walmart already have operations in the country as wholesalers but it is thought a reform to allow them to trade at retail level would be at least two years away as opposition parties are against foreign investment in the sector.