The Reserve Bank of India said FDI in multi brand retail, if implemented properly, will cool down inflation which has been hovering around the double-digit mark since December 2010.

Mr KC Chakrabarty deputy governor of RBI said that "Globally, it is considered that if (FDI in multi-brand retail) effectively implemented then prices decline. So, if you are able to pass on the benefit to customer, then prices come down. And if prices fall, so will inflation.”

Mr Chakrabarty said that "The difference in the price between producers and consumers gets narrowed, but only if it is implemented in a correct manner.”

He also said the central bank sticks to its projection of year end inflation at 7%

The government on Thursday allowed 51% FDI in the multi-brand retail sector. It maintains the move would help in lowering prices.

The guidelines for the foreign direct investment in the sector are yet to be notified.

Both the government and RBI have maintained that in India constraints on supply side is a major reason for high inflation.

(Sourced from ET)