. . After years of speculation that an end to the ban on foreign ownership was imminent, a government minister this month announced that a new policy on investments in retail will be announced in two months. The new regime is expected to relax the rules just enough to give a foothold to global majors without upsetting the government’s communist backers too much.

"We will have to ensure that foreign investment in retail doesn’t replace or displace existing retailers," Indian Trade Minister Kamal Nath told reporters in New Delhi. . . .

Mohan Guruswamy, chairman of New Delhi-based think tank, Centre for Policy Alternatives, wrote recently in the Hindu Business Line newspaper that if each of India’s 35 biggest cities gets a Wal-Mart, and if the Indian stores replicate the U.S. chain’s employee productivity, 432,000 people will lose their jobs.

The other argument against FDI is the "infant industry" case. How will Indian chains such as Crossroads and Shoppers’ Stop compete with the likes of Wal-Mart, which, as Guruswamy says, "will be able to sustain losses for many years till its immediate competition is wiped out?"

If Wal-Mart is such a big threat, how come half of the sales in the $3.8 trillion U.S. retail trade industry are still generated by single-store businesses more than four decades after Sam Walton opened his first store in Rogers, Arkansas?

Conventional wisdom says that not all FDI is equally wholesome. The type that comes in seeking to efficiently utilize a country’s natural resources and labor is good; the kind that only seeks a market – like in banking or retail – should be shunned.

"There is a general misconception that market-seeking FDI in domestic sectors such as retail yields little development impact," says a recent World Bank study by researchers Vincent Palmade and Andrea Anayiotas. "The opposite is true."

"FDI in retail," the authors explain, "has been a key driver of productivity growth in Brazil, Poland, and Thailand, resulting in lower prices and higher consumption. Large-scale foreign retailers are also forcing wholesalers and food processors to improve. And they are now becoming important sources of exports: Tesco in Thailand and Wal-Mart in Brazil are increasingly turning to local products to feed their global supply chains. . . "