Parliament last week voted to allow Foreign Direct Investment in India's growing retail sector, with multi-brand retailers allowed to take a 50 per cent stake, and single-brand retailers 100 per cent.
The move enables global retail firms such as Wal-Mart Stores, Tesco and Carrefour to set up shop with a local partner and sell directly to consumers, in a move tipped to transform India's $US450 billion retail market.
Mohan Khandelwal, who runs a family-owned store, or kirana, in Delhi, has told Radio Australia's Connect Asia shops like his are under threat.
"Business will be hit, but I hope it is not going to be bad," he said.
"The small customers will still stay with me. People who want to buy in bulk will go to the supermarkets.
"I might retain some clientele who buy in small quantities."
Independent retailer dominate India's retail market, making up 93 per cent of the market, and giving the country the highest shop density in the world.
The new laws to allow foreign investment into retail has caused a major uproar with protests and mass rallies.
Praveen Khandelwal from the Confederation of All India Traders, a trade group that represents 50 million local businesses, says global giants such as Wal-Mart are not welcome in India, because their enormous resources will put local retailers out of business.
"We have living examples of the US, Australia, New Zealand and so many other countries where these big retailers are operating their business activities," he said.
"Because they have vast resources, deep pockets, there will be an uneven and unhealthy level playing field, where our 'mom-and-pop' shops and kirana stores will not be in a position to compete with them, resulting in the closure of their shops."
Not all are convinced that better-organised foreign supermarkets will wipe out smaller retailers.
M K Venu, an economic analyst who has studied the retail sector in detail, feels they will survive and perhaps even thrive alongside supermarkets.
"I think these fears are unfounded because most of these big stores...will be outside the city limits," he said.
"In the last six years a lot of Indian business has set up big retail units and they have not affected the 'mom and pop' shops, which have consistently grown in the cities.
"They have grown their businesses even while the Indian businesses have spread their multi-brand chain."