Govt allows FDI in multi-brand retail, aviation

NEW DELHI: India opened its supermarket sector to foreign chains on Friday after months of dithering, pushing ahead with the boldest reforms yet in Prime Minister Manmohan Singh's government as it tries to revive the country's tottering economic growth.

The government has decided to allow foreign airlines to buy stakes of up to 49 per cent in local carriers, heavy industries minister Praful Patel said on Friday, in a much-awaited policy move that provides a potential lifeline to the country's debt-laden airlines by opening up a fresh source of funding.

The move allows global firms such as Wal-Mart Stores to set up shop with a local partner and sell directly to consumers for the first time, which supporters say could transform India's $450 billion retail market and tame inflation.

Singh's government ignored calls from political parties for a U-turn on a hike to heavily subsidized fuel prices announced on Thursday, and also approved a policy to allow more foreign investment in airlines as well as selling off stakes in major state-run industries.

India's inability in the past months to push through major reforms and ease its subsidy burden as growth slowed sharply has put it in danger of becoming the first of the big " BRICS" emerging economies to see its credit rating downgraded to junk.

Prime Minister Singh was credited as the economist who opened up India's economy in the 1990s, but since taking office eight years ago he has repeatedly put off or rolled back difficult economic decisions.

Singh will need resolve and the support of powerful Congress party boss Sonia Gandhi if he is to muster the political will to fight off a wave of protests from both political allies and the opposition over reforms seen as costing jobs and raising prices.

The supermarket policy was first announced last year but a political backlash forced the Congress-led government to put the measure on hold.