The literary meaning of trade is exchanging of goods. It may be defined as the exchange of commodities between individual or groups either through barter system or through any medium such as money. It includes all the selling and buying activities either within a country or across the boundaries of the country. In actual practice, trade is the whole procedure of distributing the goods produced by different person or industries to their ultimate consumers.
Definition: Trade is an activity of buying and selling of goods for money or other goods.
Types of Trade
Trade can be classified into two components:
- Home Trade
- Foreign Trade
1. Home Trade / Domestic Trade / Internal Trade / Local Trade
In Home Trade, exchange of goods or trade is conducted within the boundaries of a particular country. Seller and buyer belong to the same country. It is also known as domestic trade, local trade or internal trade. Home Trade has two types.
- Wholesale Trade: Wholesale trade means buying and selling of goods in large quantities. Wholesale buy goods from producers or distributors in order to sell them in small quantities to the shopkeepers (retailers). Wholesaler has specialized dealings in particular items. He purchases in bulk from producer or industrialists and sell them in small quantity to retailers.
- Retail Trade: Retailing means selling the goods (commodities) in small quantities to ultimate consumers. Retailer is a middleman who purchases goods (commodities) from wholesaler or manufacturer and provides these goods to the consumers near their houses.
2. Foreign Trade / International Trade / External Trade
Foreign trade (international trade) is a trade or exchange of goods and services between two or more independent countries for their mutual advantages. It includes import and export commodities among the producer and consumer countries. Foreign or international trade is an integral part of economy and plays a vital role in economic growth and social welfare of a country. Foreign trade has three types.
- Import Trade: When a country buys goods and services from other countries, it is known as import trade. For instance, India buys petrol from Iran.
- Export Trade: When a country sells goods and services to other countries, it is known as export trade. For example, India Sells rice to European countries.
- Entrepot Trade: In Entrepot Trade, goods are imported from various countries with a view to re-export them to other counties. In this type of trade, goods are kept in bonded warehouses till they are re-exported. No import duty is charged on the goods. Crude petroleum and petroleum products are the examples of entrepot trade.