October is the beginning of India’s festive season, a time when shopkeepers’ profits soar amidst the gift-giving and all-round revelry tied to Hindu holidays like Dussehra and Diwali. Last week however, some 7,000 small shopkeepers, street vendors and traders shuttered their businesses to gather in the district of Azad Maidan in south Mumbai (formerly Bombay). Carrying placards saying SAVE SMALL RETAILERS, they forewent the day’s earnings in order to march in protest against big national and international chain stores like Reliance Retail and Wal-Mart, who the shopowners say are threatening their livelihoods.

With the economy galloping and the ranks of the middle class swelling, India’s $350 billion retail sector — which a McKinsey study says will be worth $1.52 trillion by 2025 — has local and overseas corporations salivating. India is a nation of shopkeepers: over 95% of the country’s estimated 12 million retail outlets are small, mom-and-pop operations, striving alongside countless hawkers, vendors and street-stall owners. The network of small local markets that supply much of India’s groceries has been honed over decades, but the notoriously inefficient system of middlemen it relies upon has been dogged by wastage.

Now, however, hundreds of supermarkets are opening across the country, revolutionizing the sector with refrigerated transportation and modern management practices. The largest chain, Subhiksha, has some 760 outlets across India, while Big Apple aims to have 100 of its 7-Eleven-style convenience stores in Delhi alone by the end of this year. Reliance Retail, a division of India’s biggest conglomerate and arguably the most formidable player in the retail market, plans to invest $5.5 billion to open outlets in 784 cities across the country. At the same time, foreign companies such as Tesco and Carrefour are trying to gain a toehold via joint ventures with local players, following a government ruling that prohibits foreign big-box retailers from entering the market full-on. Wal-Mart has already announced a tie up with the Bharti Group, India’s leading telecom player.

But while these new supermarkets still only account for less than 5% of the industry, opposition to their presence is growing louder. In the past few months there have been protests in Uttar Pradesh in central India and the communist-ruled Kerala and West Bengal, including violent demonstrations last September that forced Reliance Fresh, the food stores arm of Reliance Retail, to shut their shops and lay off staff. “We want the government to stop large corporations from entering the retail segment until it puts in place a national policy that is agreeable to all the stakeholders including small traders, shopkeepers, wholesalers and vendors,” says Dharmendra Kumar of India FDI Watch, a coalition of labor unions and trade associations that has been at the forefront of the recent agitation. “Retail is the second-largest employer in the country; the livelihoods of 40 million people are likely to be affected if big players are allowed in at such an alarming pace.” Mohun Guruswamy, from the Delhi-based Centre for Policy Alternatives, warns that without some regulation over retail giants like Wal-Mart, an avalanche of cheap goods from China and Southeast Asia could bury India’s own manufacturers.

Those in favor of the shift to larger, modern stores argue that India’s market is large enough to accommodate both small and big retailers, and the benefits of outweigh the costs. “Organized retail will benefit both consumers and farmers,” says Gibson Vedamani from the Retailers’ Association of India, pointing out that both will gain from more efficient supply chains and the economies of scale organized retail will offer.

Some analysts see an element of political opportunism behind the recent protests. With India’s coalition government crumbling thanks to a falling-out with its Leftist supporters over a contentious nuclear deal with the U.S., elections could be called any time now. An issue like organized retail helps rally millions, and opposition parties have been quick to latch on to it. More mass protests and populist moves to clamp down on big retail — like the Uttar Pradesh government’s order to shut down Reliance Fresh — can be expected in the months to come.

In the face of growing opposition, India’s retail heavyweights are digging in. “We stand committed to what we have set out to achieve,” Mukesh Ambani, chairperson and managing director of Reliance Industries, told shareholders at the annual general meeting last week, adding that resistance to big retail would abate once benefits begin to show. Another conglomerate, the $4.5 billion Mahindra Group, announced plans to enter the organized retail fray on the same day as the Mumbai protest. India’s government, in a possible attempt to placate its leftist partners, has commissioned a study on the impact of organized retail on small stores to come up with measures to help them cope. As Guruswamy points out, “organized retail is the future, we can’t keep it out. The point is to make its entry as painless as possible.”