Trade and Commerce is a channel by which goods and services are supposed to traverse from the producer to the consumer. The basic need for trade and commerce arises from the fact that none of us can fulfill our needs and wants by ourselves, but need to depend upon others and this dependence gives rise to exchange or more appropriately put an interaction in the economic sense. By trade and commerce in agriculture we mean agricultural produce which is consumed by the end consumer. The inputs that go into production of agro-commodities and associated services are outside of this purview. The channel that we are talking about is in the form of a chain which involves primary producers, middlemen, and consumers. It can thus be logically deduced from this that on their journey from the producer to the consumer, goods and services are subject to some kind of transformation in the form of processing and value addition. In all this the basic assumption is that the laws of market economics apply albeit with the intervention of the state, which brings an element of social control.
A fundamental question that can be raised by an average citizen is whether free trade and commerce is a basic right of citizens with no intervention from the state whatsoever. Whereas it is indeed a fundamental right, a regulatory framework to monitor the conduct of commercial dealings between citizens is an absolute necessity: in addition to laws, affirmative actions too are needed, free market cannot mean law of the jungle. The classical example is that of legal tender (money in the form of currency), creation and enforcement of which is the responsibility of the state. In the absence of it, citizens will be reduced to a barter form of trade and commerce. Say if A wants rice in exchange of wheat, he has to first find a person who is willing to purchase wheat and has rice to sell. Barter economy or direct exchange of goods and services without the use of an intermediate mechanism like money will make it impossible for human civilization to survive in its present form.
There are certain conditions which are essential for free trade and commerce in agriculture to happen.
- Existence of markets
- Mechanisms of marketing
- Physical infrastructure
- Social framework (policies, laws etc)
Let us discuss the above four points in a nutshell.
The existence of markets is largely decided by the needs and necessities of the people and the quantum of purchasing power available with them. The needs of people can also be met by social mechanisms like State support and welfare in the form of subsidies and concessions. This does dent the open-market and lessen its impact on trade and commerce. Nevertheless in agriculture the free-market mechanism works more vigorously than elsewhere. Agricultural produce is harvested and processed before it is marketed to the end consumer.
The mechanisms of marketing are very important as they are the ultimate determinants of the price structure which eventually tend to affect commercial deals. Agricultural markets may be classified on the basis of
- the nature of transactions(spot or futures)
- geographical spread(local, regional, national or global)
- commodities( perishables, processed goods or bullion)
- regulated or unregulated
- wholesale, retail or specialized wholesale(mandi)
- direct(without intermediaries) and Indirect( chain of intermediaries)
The functions of agricultural marketing will involve
The transactional mode for conducting business can be any of the alternatives
- Open auction
- Quotation and tenders
- Over the counter selling
The world of trade and commerce is incomplete without adequate physical infrastructure. Transport and Communication facilities, Warehouses and God- owns, Power and Water Supply, Lighting and Market yards etc.
A Social framework may be defined as a body or a set of laws, policies and plans needed to conduct business.
References and Acknowledgements:
Agriculture Dept (Govt of Madhya Pradesh)
Agmarknet (Govt of India)
Submitted by Avinash Karnick on Thu, 08/08/2013 - 16:56