India should end the ban on foreign companies being able to own and open food retail stores in the country, a key government report has said.

The call for reform, published in The Economic Survey 2008-09, which is prepared by India’s finance ministry, will be welcomed by foreign food retailers.

India is seen as an attractive overseas market for international retailers but, at present, non-Indian firms are forbidden from owning multi-brand retail outlets, although the likes of Wal-Mart and Tesco have formed wholesale cash-cand carry ventures with local players.

However, the government report, published ahead of Monday’s (6 July) Indian budget, suggested that reform of the foreign direct investment laws could drive growth in the wider Indian economy.

“Initially, this could be subject to setting up a modern logistics system, perhaps jointly with other organized retailers,” the report said.

“A condition could also be put that it must have (for five years say) wholesale outlets where small, unorganized retailers can also purchase items (to facilitate transition).”