Protesters Tell Wal-Mart to Quit India

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At the protest rally, Chavan explained that he makes $80 to $100 a month. He worries that 200,000 porters like him working in Maharashtra's 29 markets could lose their jobs if private-sector companies expand aggressively. "We know no other job but this," says Chavan.

Branching Out Beyond Food

Organized retail has plenty of potential in India. It accounts for just 3.5% of India's total $336 billion retail market—and the opportunities are enormous. By 2017, retail consultant KSA Technopak projects organized retail will account for 28% of the $1 trillion Indian retail market. Reliance's $3.9 billion retail project, for instance, includes setting up one-stop shops for wholesale markets, retail outlets, and entertainment centers at bus junctions in smaller towns across India. And at last count, Reliance had opened 325 convenience stores in India, with 205 more planned by the end of fiscal 2008.

However, burdened by the challenges posed by political opposition to its expansion, Reliance has decided to diversify its risk beyond fresh foods, which entails direct contact with farmers and inevitable problems with middlemen like the APMC. The company, on Oct. 10, opened Reliance Trends in Gurgaon, near New Delhi. The store will sell private labels and branded apparel, luggage, and accessories.

On Oct. 9, Reliance announced its first international brand deal, winning exclusive marketing and distribution rights for Apple (AAPL) products. Reliance will set up 10 iStores in India showcasing iPods, Macs, and (when Apple is ready to market them in India) even iPhones. The first iStore will open in Bangalore in November—just in time for the Hindu New Year, which is the peak spending season in India.

Old Laws Aid Local Businesses

To realize the full potential of retail in India, New Delhi still has to repeal archaic laws that hinder land acquisition for organized retail. So far, the government has moved cautiously. Only single-brand foreign companies are permitted to set up retail operations in India. Multibrand players can set up wholesale or cash-and-carry operations. Metro has been doing that since 2003 and Wal-Mart's joint venture with Bharti will be opening something similar next year. Neither Tesco nor Carrefour has been successful in searching for local partners and both have shelved their India retail plans for now.

That's creating opportunities for local companies such as Reliance, Tata, Bharti, ITC and the Aditya Birla Group. The newest entrant into the retail business is tractor- and automaker Mahindra & Mahindra, which plans to open stores selling luxury products. Retail "is a natural extension of the group's existing business," says Raghunath Murti, executive vice-chairman of Mahindra Intertrade.

India has just begun to change into an economy with an organized retail environment. And as more supermarkets and hypermarkets spring up around India, the mom-and-pop shop owners are likely to become more aggressive. It's a good bet there will be a lot more demonstrations like the one at Mumbai's Independence Grounds in the coming months.

Lakshman is a reporter in BusinessWeek's Mumbai bureau