internal_trade

Chapter 10: Internal Trade

Learning Objectives

• Understand the meaning and types of internal trade.

• Identify the services of wholesalers to manufacturers and retailers.

• Explain the services of retailers and classify their types.

• Differentiate between small scale and large scale retailers.

• Understand the role of Chambers of Commerce in promoting internal trade.

• Implement the guidelines regarding GST for the year 2024-25.

10.1 Introduction to Trade

• Definition of Trade: Buying and selling of goods and services for profit.

• Historical Context: Trade has been a part of civilization from ancient times.

• Growing Importance: The rise of new products and global availability accentuates the need for trade.

• Self-Sufficiency Limitation: No individual or country can produce all needed goods/services.

• Trade Classification:

  • Internal Trade: Intra-country transactions.

  • External Trade: Transactions between countries.

10.2 Internal Trade

• Definition: Buying and selling of goods/services within a nation.

• Examples of Internal Trade: Transactions from local shops, central markets, departmental stores, and door-to-door sales.

• Legal Aspects: No customs or import duties on internal trade.

• Market Dynamics: The co-existence of diverse markets in rural and urban settings, which includes local shops and multinational brands.

10.3 Types of Internal Trade

• Classification:

  • Wholesale Trade: Bulk transactions meant for resale or intermediate use.

  • Retail Trade: Smaller transactions aimed at ultimate consumers.

10.3.1 Wholesale Trade

• Definition: Transactions in large quantities for resale.

• Role of Wholesalers:

  • Connect manufacturers to retailers.

  • Assume risks for goods in their name.

  • Perform various logistical and marketing functions.

10.3.2 Services of Wholesalers

• To Manufacturers:

  • Facilitate large-scale production by pooling orders.

  • Absorb risks like price fluctuations or spoilage.

  • Provide financial assistance, enabling cash flow flexibility for manufacturers.

  • Act as a source for market information and consumer preferences.

  • Aid in continuous production by managing storage.

10.3.3 Services to Retailers

• Availability of Goods: Wholesalers maintain stock variety to ease retailers' inventory burden.

• Marketing Support: Provide advertising and promotional resources to stimulate sales.

• Credit Facilities: Extend credit to retailers, aiding in financial adaptability.

• Expertise Sharing: Inform retailers about market trends and product specifics.

• Risk Mitigation: Small purchases minimize risks associated with overstocking.

10.4 Retail Trade

• Definition: Retailers sell goods/services directly to consumers.

• Functions of Retailers:

  • Managing diverse product stocks, providing storage, and facilitating sales.

  • Collecting market insights to help manufacturers/wholesalers with strategies.

10.4.1 Services of Retailers

• To Manufacturers and Wholesalers:

  • Help distribute goods to scattered consumers.

  • Undertake personal selling, enhancing consumer engagement.

• To Consumers:

  • Maintain consistent product availability.

  • Offer information on new products, ensuring convenience.

  • Provide a wide selection of products and after-sales services.

10.5 Types of Retailing

• Classification Basis: By size, ownership type, merchandise handled, and operation structure.

  • Itinerant Retailers: Traders without a permanent location; e.g., hawkers, peddlers.

  • Fixed Shop Retailers: Retail stores with established locations that offer diverse product types.

10.5.1 Itinerant Retailers

• Characteristics: Small scale, limited resource traders focused on taking products directly to consumers.

  • Examples:

    • Peddlers and Hawkers: Small goods sold from mobile assets.

    • Market Traders: Set up shops on designated market days.

    • Street Traders: Sell common consumer items in populated areas.

    • Cheap Jacks: Temporary independent shops that operate in high-traffic areas.

10.5.2 Fixed Shop Retailers

• Characteristics: Permanent operational setup with a wide range of services and credibility.

  • Types of Fixed Shop Retailers:

    • General Stores: Basic needs fulfilling shops in local areas.

    • Speciality Shops: Focused on a specific product line (e.g., electronics, garments).

    • Departmental Stores: Large facilities with multiple product categories.

    • Chain Stores: Multiple locations under one brand ensuring standardized pricing.

10.6 Role of Chambers of Commerce

• Purpose: Promote collective interests of business sectors.

• Functions: Interact with government to facilitate trade through policy support, infrastructure development, and streamlining tax structures.

• Activities Include:

  • Supporting interstate movement of goods, regulating local taxes, harmonizing sales tax, offering marketing support for agro-products, and advocating for labor legislation.

Goods and Services Tax (GST)

• Introduction: Implemented to unify the Indian market and simplify tax processes.

  • Aims to eliminate multiple taxes and provide a streamlined tax structure.

• Key Features:

  • Covers CGST, SGST, and IGST.

  • Structured into four tax slabs.

  • Anti-profiteering measures to check excessive price inflation.

Conclusion

• Importance of Internal Trade: Vital for the economic activity within a country, enhancing the distribution of goods and accessibility for consumers.

• Development through GST and Supportive Policies: Expected to empower citizens and stimulate economic growth.