India has thrown open its $450 billion retail market to global supermarket giants, approving its biggest reform in years that may boost sorely needed investment in Asia's third-largest economy.

The world's largest retail group, Wal-Mart Stores, and its rivals see India's retail sector as one of the last frontier markets, where a burgeoning middle-class shops at local, family-owned merchants.

Allowing foreign retailers to take stakes of up to 51 per cent in supermarkets would attract capital and help unclog supply bottlenecks that have kept inflation close to a double-digit clip.

Millions of small retailers oppose competing with foreign giants, providing a lightning rod for criticism of the ruling Congress party ahead of crucial state elections next year.

Food Minister K V Thomas said the government will allow 51 per cent foreign direct investment in multi-brand retail - as supermarkets are known in India. It will also raise the cap on foreign investment in single-brand retailing to 100 per cent from 51 per cent.

The new rules may commit supermarkets to strict local sourcing requirements and minimum investment levels aimed at protecting jobs, according to the media.

World No.2 retailer Carrefour hailed India's decision to open its supermarket sector to foreign players and said it would continue to develop its existing cash-and-carry business in the fast-growing market.-Reuters