India could relax its rules on allowing foreign investment into its fast-growing retail sector, according to a government minister.

The Indian government currently bars overseas retailers from investing directly in the country's retail business but a number of multinational groups, including Wal-Mart, have set up local joint ventures.

There has been fierce political opposition to the growth of organised retail in India - with domestically-owned retail groups like Reliance Retail not immune to the hostility and criticised for expanding.

Some state governments have forced the closure of stores after protests from smaller traders who fear that the growth of large retailers could damage their livelihoods.

However, India has signalled it could change the regulations. The country's Department of Industrial Policy and Promotion (DIPP) has appointed an independent agency to study the impact of overseas investment. The agency is set to publish its findings in March.

Subodh Kant Sahai, government minister for the food industry, said: "India may open up its US$330bn retail market if the Government is convinced that kirana stores [small, "mom-and-pop" outlets] would not be affected by big retailers."

Sahai added that there had been a political motive from some state officials to oppose the growth of organised retail.

"Some people, particularly ex-politicians without a job, are making cheap slogans [against organised retail] without actually realising that they were hurting the farmers," Sahai said.