As citizens of the world's largest democracy, Indians are trusted to choose their own government. But, until recently, they were not free to choose what they wanted to buy. A paternalistic regime of control manifested itself in licensing laws that restricted the production of consumer goods and in regulations that limited the size of manufacturing plants. A lack of incentives held back investments to develop new products. Multinational companies were kept out, and imports were throttled by tariffs often exceeding 200 percent. The result was that Indians could buy any car as long as it was a Morris Oxford or a Fiat, any toothpaste as long as it was Colgate, any watch as long as it came from HMT, and any radio as long as it was produced by Philips.

Now, however, market liberalization and increasingly assertive consumers are sowing the seeds of a retail transformation that will bring bigger Indian and multinational operators on to the scene. Although the rewards might not be instant, there are tremendous opportunities in such a huge market, worth a total of $20 billion a year in India's four largest cities—Mumbai, Delhi, Calcutta, and Chennai (in descending order of size)—and $180 billion overall....