Study of the Indian firms' supply chain dependency on China

Abstract

International trade refers to the exchange of goods or services or both between countries. Since time immemorial, human civilization has been indulging in foreign trade, utilizing the barter system. Trade was necessary due to the inequity of distribution & availability of resources across the globe. Evidence of the earliest trade relations is from Mesopotamia and the Indus Valley civilization in 3000BC. Traded goods included spices, textiles, precious metals, silk, food grains etc. Huge sea voyages were undertaken that led to discovery of new lands and products for trade. In fact, currency is the result of people from the middle ages trying to ease the process of trade. Industrial revolution, improvement in ship building infrastructure, understanding sea ways and creation of man-made canals (eg Suez Canal) and invention of refrigerated ships were instrumental in promoting trade further. Excess production in one country could now be easily sold off to another nation in order to gain foreign currency. This led to the birth of mainly 3 kinds of trade: • Export: when goods or services are sold from the originating country. • Import: when goods or services flow in to the country of consumption. • Entrepot: when goods or services are bought from one country and sold to another after value addition. Post widespread industrialization and the rise of multinational organizations, foreign trade became an important metric to gauge a nation’s development and its level of adaptation to globalization. In fact, in the current world the ease of doing business metrices are used to lure MNCs and industrialists such that it develops a symbiotic relation between businesses and nations. While it generates revenue and cost savings for the businesses (mostly due to business process outsourcing), it leads to rise of employment, infrastructure development, cost of living and foreign currency reserves for nations.