Multinational retailers, still largely barred from India's fast-growing but chaotic industry, are pinning their hopes for now on China, where the investment climate is ripe for growth.

Both countries offer enormous promise to the world's biggest retailers, but the likes of Wal-Mart Stores, Metro and Carrefour reckon China will deliver the goods in the short term as they wait for India to open up its retail industry and embrace the western way of shopping.

Global leader Wal-Mart has opened 80 stores in China to grab a slice of the $892 billion retail market there.

But in India, where modern retail, with its hypermarkets and one-stop shopping, has only a small share of a splintered $350 billion industry, U.S.-based Wal-Mart has sparked political concerns and protests by traders and shopkeepers even before opening its first cash-and-carry store.

In the biggest demonstration yet against modern retail, more than 20,000 farmers and shopkeepers gathered in Mumbai earlier this month, chanting It's now or never, Wal-Mart quit India.

The $10 you put in China is going to give you a better return in the short term than the $10 you put in India, said Wai-Chan Chan, leader of consultancy McKinsey's Greater China Consumer Practice.

Whatever happens in India, there are significant barriers to expansion. Mom-and-pop stores and people complaining about large retailers is one of them, he said.

Nonetheless, India's promise is tantalizing.

Its retail industry is forecast to nearly double by 2015, and it already tops AT Kearney's Global Retail Development Index as the most attractive market to be in.

But while China opened the door to foreign investment in retail 15 years ago, protectionist India has dithered, and still limits foreign multiple-brand retailers such as Wal-Mart to wholesale or license and franchise operations.

Something can look very attractive and still be very hard to crack, said Raman Mangalorkar, head of Greenbox Realty, a retail-focused real estate firm in Mumbai.

In some ways, the train has already left the station for foreign retailers in India, he said.

TO CAP IT ALL

India's retail sector is dominated by small family-run shops, with modern retail making up under 4 percent of the market.

In China, where retail is growing at about 10 percent a year and estimated to hit $1.3 trillion in five years, according to McKinsey, consumers are enthusiastic.

At a Wal-Mart store in Shenzhen, Western foods are stacked next to the live prawns and dried fish usually found in wet markets.

There's really no difference between it and a Chinese market, said hotel employee Wendy Mao, 23, at the super center.

China is an important market for Wal-Mart, which has pulled out of South Korea and is struggling in Japan, where it is spending $878 million to fully own its Seiyu Ltd unit.

China opened up its retail sector earlier than India, so we followed the opportunity there first, said Beth Keck, Wal-Mart's senior director of international corporate affairs.

Both countries provide great opportunity in different ways and we are very optimistic about both markets, she said.

French rival Carrefour, which enjoyed 53 percent growth in sales in China last year, opened its 100th superstore in the country and plans to open 20-25 stores a year. Britain's Tesco Plc plans to open 10 stores a year in China.

But both Carrefour and Tesco have shelved plans for India, and Tesco has criticized the frenzy being whipped up among foreign retailers about entering India.

Foreign retailers need to be patient, form alliances with local firms and build a different business model in India, said Sanjay Dongre, a fund manager at UTI Asset Management in Mumbai, which manages more than $1 billion.

There's clearly money to be made, but it will take time.

NO EASY RIDE

Even in China, foreign retailers can't count on a completely smooth ride. Wal-Mart, which is known to shun unions, was forced to allow its staff to join the country's only trade union.

Foreign firms also face competition from homegrown retailers such as Wumart Stores Inc and GOME, which are expanding fast in China's rush to establish its own brands.

For now, China is streets ahead in the luxury goods market, as well. It is already the world's No. 3 consumer of high-end fashion, according to Ernst & Young, buying more than $2 billion worth a year, a figure that could top $11.5 billion in 2015.

India is catching up, with the number of people with over $1 million in investible assets rising nearly 21 percent in 2006.

Luxury brands, including Chanel, PPR's Gucci and Louis Vuitton, have opened stores in India to tap a market estimated to be worth nearly $1 billion and to grow 15-17 percent a year, according to consultancy Technopak Advisors.

Ultimately, big retailers may not have a choice when it comes to choosing to invest in either country, said Anil Rajpal, an associate vice president of Technopak in India.

There are very few fast-growing markets with so much potential as these two. No one can really afford to choose one over the other. You could wait and watch, perhaps, but you can't stay out, he said.

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