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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.

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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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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.

Unlike in the United States, where more than 80 percent of Americans shop at supermarkets and chain stores, most Indians still shop in , 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 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."

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