Tesco is one of a number of foreign retailers that have been approached about launching a potentially lucrative retail business in India.
The Indian economy is growing at rapid speed
Indian firm Bharti Enterprises said it has spoken to Tesco and other foreign retailers about forming a joint venture and will choose a partner soon.
Only single-brand foreign retailers can operate in India under current rules.
Tesco, which said it could not comment on the issue, has been urged to focus on the wholesale sector in India.
The Bharti joint venture is seen as a huge opportunity for foreign retailers to get a foothold in a market analysts expect will double in size to $637bn by 2015.
Bharti has held talks with Wal-Mart, Carrefour and Metro as well as Tesco, according to reports.
"We are in the final stages of choosing a partner," Sunil Bharti Mittal, Bharti's chairman, said at a trade conference in London.
He confirmed that Tesco was one of the firms on Bharti's shortlist.
Indian officials have urged Tesco and other firms to consider other options in India while restrictions on operating stores are in place.
'Cash and carry option'
"Tesco has to be bold enough to go into cash and carry," Amit Mitra, secretary general of the Indian Chamber of Commerce, told Reuters.
"This is where Tesco has to go in; because if Metro is already there with its feet on the ground, when India's overall retail market opens they will be able to spurt."
As the Indian economy continues to expand strongly, its retail industry, currently worth $300bn (£161bn) a year, is forecast to grow to $427bn by 2010 and $637bn by 2015.
Large overseas retailers such as Tesco, Metro and Wal-Mart are currently barred at the retail level in India, but not in the wholesale market.
UK Prime Minister Tony Blair is meeting with his Indian counterpart Manmohan Singh in Downing Street on Tuesday and the two are discussing trade issues with business leaders.