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Why India pulled the welcome mat for Wal-Mart

Intense protest prompted India to shelve plans this month to allow box stores like Wal-Mart. But many say the retail sector is backward and needs the jobs and investment such stores would bring.

By Rebecca ByerlyContributor / December 25, 2011

A couple looks at children’s clothing at a shop off a main\ thoroughfare in Old Delhi. Most Indians shop in small stores that sell everything from produce to clothing and spices.

Melanie Stetson Freeman/Staff

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New Delhi, India

The Indian government's recent plans to open the retail sector to foreign big-box stores like Wal-Mart was met with such vehement pushback from people across India that the plans had to be shelved earlier this month.

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Unlike in the United States, where more than 80 percent of Americans shop at supermarkets and chain stores, most Indians still shop in kirana, or tiny mom and pop stores. The 15 million small retail outlets here employ tens of millions of people.

While India has welcomed many Western companies under two decades of economic liberalization, the move to megastores has proved to be a tough sell.

The idea of driving long distances on bad roads, battling for a parking spot, and choosing between hundreds of brands perplexes many consumers who say they are happy with the current small-and-local model. But the domestic resistance frustrates Indian technocrats and business elites who are focused on keeping India's growth rates high.

While Wal-Mart worries many shopkeepers, some are banking on customer loyalty and shopping habits to save them.

Rajiv Malik owns a kirana in the alleyway of a middle-class neighborhood in Delhi. His shop, a mini-version of Wal-Mart, offers everything from shampoo and vegetables to underwear and plastic beach balls.

"Over half of my customers buy on credit, and I will deliver anything from a loaf of bread to a few eggs," says Mr. Malik, who keeps track of purchases in a big, yellow notebook. "I don't think that Wal-Mart will be able to provide this kind of service."

Ilyas, who goes by one name, plays dual roles as a middleman buying fruits and vegetables from whole-salers and running a roadside stand. Like Malik, he thinks he can compete. "Even though big stores may be able to sell for less, they can't keep their fruits and vegetables as fresh as mine," he says. "My customers are willing to pay more for quality."

Job jitters

While Malik and Ilyas may not seem concerned about the coming of the big shops, millions of others worry that they could lose their jobs. Responding to that anxiety, opposition parties blocked the government's decision to allow foreign, multibrand retailers, such as Wal-Mart and Tesco.

"The economy as a whole can only gain if the presence of foreign retailers creates more opportunities for the manufacturing sector, as opposed to being threatened by it," says Rajeev Chandrasekhar, one of the members of Parliament who blocked the measure.

The failed resolution left economist Rajiv Kumar, the secretary-general of the Federation of Indian Chambers of Commerce and Industry, fuming.

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