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India's Prime Minister Manmohan Singh has reversed a decision to let foreign retailers expand in the country, a move that may weaken efforts to revive growth and curb inflation.

Bloomberg reports that the retreat puts off an influx of foreign investment from companies including Wal-Mart Stores Inc. and Tesco Plc that are bidding to enter the $396 billion market.

Singh earlier approved allowing overseas companies to own as much as 51 percent of retailers selling more than one brand, as long as they sourced 30 percent of their products from local suppliers. Singh argued that opening the retail sector to foreign investors would tame inflation and reduce food wastage in a country where 40 percent of vegetables rot before they can be sold, says Bloomberg.

But the decision was resisted by India's two largest coalition partners, Trinamool Congress and the Dravida Munnetra Kazhagam, as well as from opposition parties.

Shares of Indian retailers who could have tied up with foreign companies fell following Singh's decision to put off his retail plan.

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