Page 18 - DMGT545_INTERNATIONAL_BUSINESS

Unit 1: International Business: An Overview

According to Food Processing Minister Subodh Kant Sahay, “It should be done in such a way notes
that it would boost our agriculture. Our farmers must also get benefits of economic liberalization”.
The Investment Commission, set up by the Prime Minister in 2004 to boost investments,
made recommendations to the government on both policies and procedures to facilitate
greater FDI inflows. The report said, “Foreign food retailers could help in the transmission
and adoption of better practices throughout the supply chain and could also facilitate
access to export markets.”
Agreeing with the panel’s suggestion, Mr. Sahay said “there was a need to bring market
discipline in procuring agro products from farms. FDI in food retail is the need of the
hour. It would mean use of latest technology in the sector, more yield per hectare and
optimum usage of arable land. Allowing FDI will create demand across all levels, from
raw material to finished products, and, at the same time, maintaining every level of quality
and standards.”
After permitting 51 percent FDI in single-brand retailing, allowing FDI in select food items,
fresh and processed fruit and vegetables is the next step. It would include retailing of farm
and dairy produce, marine and poultry products, besides fruit and vegetables. While 100
percent FDI is allowed in food processing, investment is restricted in retailing.
Today, barely 6 percent of fruit and vegetables produced in India are processed. The
country has targeted 20 percent processing within the next few years and is keen on
enhancing export of these items from less than 1-3 percent. The government was also
considering opening up the $330 billion retail market with adequate provisions to protect
neighbourhood stores. The commerce department is waiting for the report being prepared
by ICRIER on the impact of retail on local Kirana outlets. The study was commissioned to
the Delhi-based think-tank after the Congress party voiced its concerns over the effects of
FDI on retail in the unorganized sector.
Source: The Economic Times (ET), April 22, 2008.

1.5 Differences between Domestic and international Business

Difference between domestic trade and foreign trade and their peculiar problems. Trade, no
doubt, implies exchange of goods between persons, but there are marked differences between
domestic trade and international trade. The differences and the complications arise therein are
as follows:
1. Distance: The distance involved in export of goods in external trade is generally greater
than on the domestic trade.
2. Language differences: There are differences in the languages of the nations of the world. The
overseas traders should be very careful in preparing the publicity material in the languages
of the trading country.
3. Cultural difference: A producer should have full knowledge about the market of his
products. For exporting goods particularly a thorough research is undertaken.

4. Technical difference: In the national market the difference in the technical specification for
goods and their requirements is not wide.
5. Tariff barriers: In the national trade, there are no custom duties, exchange restrictions,
fixed quotas or other tariff barriers.
6. Documentations: In the home trade there are few documents involved in the exchange of
goods.

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