India's rural retail market is expected to grow by 29 percent to 1.8 trillion rupees by 2010 helped by rising incomes and changing consumption patterns, an industry body report said.

But poor infrastructure, supply chain inefficiency, and product pricing must be addressed if its full potential is to be realised, the report released by the Confederation of Indian Industry and Yes Bank on Thursday said.

Rural retail includes fast moving consumer goods, durables, agricultural inputs and autos like tractors.

The report said rural per capita income would double to 14,000 rupees by 2012 as more families switch to commercial from subsistence farming, a big enough jump to spur demand for a wider range of products.

Village households are expected to rise to 153 million in 2009-10 from 135 million in 2001-02, probably making rural India the largest potential market in the world, the report said.

However, there is no organised marketing and distribution in 87 percent of India's villages, home to 50 percent of the rural population, the report said.

Corporates are increasingly eyeing rural areas as drivers of future growth.

The Godrej group's retail venture, Adhar, which has 31 rural stores, is planning to have 1,000 in the next five years.

Triveni Khushali Bazar, a retail chain of Triveni Engineering and Industries Ltd, plans to almost double its stores to 80 by 2008, and reach 200 by 2009, the report said.

Indian Oil Corp plans to have 3,000 rural retail units alongside its fuel stations by 2012 from 1,400 now.

Firms hoping to grab a larger part of the rural market though will be battling infrastructure problems for some years.

They need to view it as a long-term commitment, and must be continuously innovative as rural consumers are often more price than quality conscious, the report said.

The development and growth of organised rural retail will result in job creation, check rural migration, raise tax generation and improve efficiencies in agriculture, it added.