Trade and Auxiliaries to Trade

Trade is an essential part of commerce. It refers to the sale, transfer or exchange of goods, whether physical or virtual, and makes the goods produced available to consumers or users. Because goods today are produced on a large scale, producers cannot themselves reach every individual buyer, so businessmen carry on trading activities to place goods in different markets. Without trade, large-scale production would not be possible.

Auxiliaries to trade

Activities that assist trade are called auxiliaries to trade. They are generally described as services because they facilitate the activities of industry and trade. Transport, banking, insurance, warehousing and advertising all play this supportive role — they support not only trade but also industry, and hence the whole of business. They help remove the various hindrances that arise in the production and distribution of goods: transport provides movement, banking provides finance, insurance covers risk, warehousing creates time utility through storage, and advertising provides information. The main auxiliaries:

• Transport and Communication: Goods are produced in particular locations — tea mainly in Assam; cotton in Gujarat and Maharashtra; jute in West Bengal and Odisha; sugar in U.P., Bihar and Maharashtra — but are consumed all over the country. Transport by road, rail or coastal shipping removes this obstacle of place, moving raw materials to the place of production and finished products to the place of consumption. Alongside it, communication facilities (such as postal services and telephones) let producers, traders and consumers exchange information, so they too are auxiliaries to business.

• Banking and Finance: Business needs funds to acquire assets, buy raw materials and meet expenses, and banks supply these funds, solving the problem of finance. Commercial banks lend through overdrafts, cash credit, loans and advances; they also collect cheques, remit funds to different places and discount bills for traders. In foreign trade they help exporters collect money from importers, and they help company promoters raise capital from the public.

• Insurance: Business faces many risks — factory buildings, machinery and furniture must be protected against fire, theft and other hazards; goods in stock or in transit may be lost or damaged; employees need protection against accidents and occupational hazards. Insurance provides cover in all such cases: on payment of a nominal premium, the amount of loss or damage, and compensation for any injury, can be recovered from the insurance company.

• Warehousing: Goods are usually not sold or consumed immediately after production; they are held in stock to be available as and when required. Warehousing provides the special storage arrangements that prevent loss or damage, overcoming the problem of storage and ensuring goods are available when needed. By enabling a continuous supply, it also helps keep prices at a reasonable level. …