"We welcome India's decision. We think economic reforms such as these will further strengthen business-to-business ties between our two countries," State Department spokesman, Mark Toner, told reporters.

"It's going to create new economic opportunities and it's also going to lead to more choices for Indian consumers," he added.

FDI in the retail sector was one of the wish list of the US companies and the US had been pushing for it for quite some time now.

Terming the opposition to the FDI in retail by various political parties as "a reflection of a vibrant democracy that India has", he said "this is part of a vibrant democracy where, you know, opposition parties can speak their mind and voice their concerns. But, you know, we view this, as I said, as a way to deepen our economic ties with India."

Last week, Corporate America had hailed the Union Cabinet's decision in this regard saying these bold economic reforms would benefit Indian consumers by bringing efficiencies and productivity to the farm-to-fork supply chain, while tamping down rising food prices and inflation.

The overall effect of these actions will accelerate India towards becoming the world's third-largest economy, which had earlier been predicted to occur by mid-century, said the US India Business Council (USIBC).

"The government's bold resolve to move on these complex reforms serves as an assurance to investors that its economic liberalization agenda begun in the early 1990s is very much on track, even in the face of the global economic downturn," the USIBC said.

"The singular act of opening the multi-brand retail sector to foreign direct investment will significantly benefit the Indian consumer by spurring the modernization of India's vast agri-retail marketplace," said Ron Somers, president of USIBC.

"Investments will now flow into India's farm-to-market supply chain, which will usher in expertise and bring efficiencies to India's supply chain infrastructure. Food price-rise and inflation will now effectively be tamed," he said.

"Opening the retail sector will create a larger market opportunity for Indian farmers, increasing quality and choice for India's sophisticated consumers," Somers added.

The Commerce Ministry set a maximum investment ceiling of 51 per cent, bringing multi-brand retail investment rules in-line with India's initial opening of single-brand retail. Single-brand retail will now be open to 100 per cent foreign direct investment.

"While this threshold for FDI in multi-brand retail serves as an excellent starting point for India's retail sector, continued relaxation of the FDI cap will serve to maximize investments in supply chains, bring foreign expertise to farming and food safety practices, and offer the best prices and choices for consumers and producers alike," USIBC said.