New Delhi: Vietnam has outpaced India as the most attractive emerging retail market for foreign investors, ending India’s three-year run at the top.

India still ranked No. 2 in the list of 30 emerging markets from Tunisia to Turkey in consulting firm A.T. Kearney’s annual Global Retail Development Index.

“India’s inability in opening up the FDI (foreign direct investment) regulations for foreign retailers will start to hit the industry’s competitiveness more than ever before,” said Saurine M. Doshi, partner, A.T. Kearney India.

Indian regulations bar foreign multiple-brand retailers from selling products to Indian consumers. But foreign retailers are allowed to to operate fully-owned subsidiaries in wholesale stores selling only to businesses.

Vietnam moved up from fourth place in 2007 owing to its rapidly growing per capita income and its liberalization of retail trade, the study said.

The study ranked India third behind Brazil and China for apparel retailers looking to invest in emerging countries.

Hemant Kalbag, principal, consumer industries and retail practice, A.T. Kearney India, said apparel is the second largest retail category and the category is expected to grow between 12% and 15% annually as disposable income grows at rates higher than in China or the US.