* CEO very positive on FDI deregulation
* CEO says food inflation to ease with more foreign players
* Optimistic about U.S. business this Christmas: CEO
By Paul de Bendern
NEW DELHI, Oct 25 (Reuters) - Wal-Mart, the world's largest retailer, expects India to open up foreign direct investment in multi-brand retail given the positive tone coming from government officials, its chief executive said on Monday.
India's $450-billion retail sector, with organised retail accounting for just 6 percent, is largely closed to foreign firms and favours small stores which provide livelihoods for hundreds of thousands and serve a market of more than 1 billion.
But Prime Minister Manmohan Singh's government has begun to speak more positively about relaxing the rules, despite the potential political backlash this could cause with some of the ruling Congress party's rural grass-root voters.
"Regarding the timing (of opening up the sector), it is not really my position to set this. It is for the Indian government but the feeling I get is a very positive feeling in the discussions we have had (with government officials)," Wal-Mart Stores Inc CEO Mike Duke told a news conference.
Duke also said he was optimistic about Wal-Mart's discount store business in the United States for the upcoming Christmas season, adding that the company has taken steps to have a more positive shopping season compared with 2009.
"There is still an overhang of concern and that impacts consumers," Duke said in India's capital city. "Regarding our own business we're optimistic."
Wal-Mart, in an equal partnership with India's top telecoms group Bharti Enterprise, operates four cash-and-carry outlets in India and also supplies to retail stores run by Bharti.
The joint venture plans to open a fifth store late in November or in early December this year.
Duke declined to say how the world's largest retailer would react to a sudden decision to open up the Indian retail sector.
"Depending on the outcome (of any government decision) we will look with our partners as to what the next steps are."
Wal-Mart has long been courting the Indian government, the private sector and local farmers to win support for removing restrictions to foreign companies investing in multi-brand retailing in the world's second-most populous country.
Duke met India's commerce minister as well as the deputy planning commission chief, who is in charge of initial proposals on how to relax FDI limitations in India's retailing sector.
LUCRATIVE MARKET
Most top retailers such as Wal-Mart and French retailer Carrefour have been waiting for India to ease foreign ownership restrictions to begin retail operation.
"It is our desire to see 100 percent opening to FDI but we do understand...a thoughtful approach to opening up and we respect that," Duke said.
India represents tremendous opportunities for foreign players given the size of the population, expected economic growth, a growing middle class and the lack of a mature and organised retail market.
Analysts say opening retail to foreign direct investment may help create thousands of jobs and rein in food price inflation by curbing waste in a country where at least 40 percent of produce rots because of inadequate storage and transportation.
"Thirty to 40 percent of produce never makes it to the consumer and that cost ends up being consumed in the system," Duke said. "Competition is just good for business and consumers benefit from that."
He did not comment on whether he expected U.S. President Barack Obama to lobby on behalf of Wal-Mart and other U.S. firms in opening up the Indian market when he visits next month.
India's current rules limit FDI in single-brand retail outlets to 51 percent, while retailers that carry multiple brands are restricted to cash-and-carry or wholesale outlets.
Germany's Metro AG operates cash-and-carry outlets in India, while Carrefour plans to set up wholesale stores.
India this year took a tentative step towards opening up retail in Asia's third-largest economy by putting out a discussion paper, but it steered clear of suggesting changes to the existing investment cap.
The entry of multinational retailers into India has been mired in controversy, with moves to open up the sector opposed by leftist parties and small traders fearful of job losses. (Editing by Alistair Scrutton and Michael Shields)