Unit 1 Topic: Foundation of Spectrum of Indian Business, B.Com Hons., Ist Sem, DU - B Com PDF Download

 Page 1


Foundations Of The Spectrum Of Indian Business 
 
1 
Institute of Lifelong Learning, University of Delhi 
 
 
 
 
 
 
 
Subject: Commerce 
 
Lesson:  Foundations Of The Spectrum Of Indian Business 
Course Developer: Romila Aggarwal  
College / Department: Bharati College,  
University of Delhi  
 
 
Page 2


Foundations Of The Spectrum Of Indian Business 
 
1 
Institute of Lifelong Learning, University of Delhi 
 
 
 
 
 
 
 
Subject: Commerce 
 
Lesson:  Foundations Of The Spectrum Of Indian Business 
Course Developer: Romila Aggarwal  
College / Department: Bharati College,  
University of Delhi  
 
 
Foundations Of The Spectrum Of Indian Business 
 
2 
Institute of Lifelong Learning, University of Delhi 
Table of Contents 
 
? Introduction 
? A Brief History of Indian Business  
? What is Business? 
 Relationship between Business, Profession and Employment  
 Relationship between Business and Commerce   
? Spectrum of Business Activities  
 Industry    
 Commerce  
 Trade  
    Ancillary and Auxiliaries to Trade   
 Relationship between Industry, Trade and Commerce 
? Two Sector Classification 
 Manufacturing Sector 
 Service Sector 
                     Meaning 
                     Features of Service 
                    Types of Services 
                     Products VS. Services 
                                         Importance of Service 
                    Growth of Service Sector in India 
                                     Indicators of growth 
                                 Reasons for growth 
                                  Implications of growth 
? Summary  
? Exercises 
? Glossary 
? References  
          
 
Page 3


Foundations Of The Spectrum Of Indian Business 
 
1 
Institute of Lifelong Learning, University of Delhi 
 
 
 
 
 
 
 
Subject: Commerce 
 
Lesson:  Foundations Of The Spectrum Of Indian Business 
Course Developer: Romila Aggarwal  
College / Department: Bharati College,  
University of Delhi  
 
 
Foundations Of The Spectrum Of Indian Business 
 
2 
Institute of Lifelong Learning, University of Delhi 
Table of Contents 
 
? Introduction 
? A Brief History of Indian Business  
? What is Business? 
 Relationship between Business, Profession and Employment  
 Relationship between Business and Commerce   
? Spectrum of Business Activities  
 Industry    
 Commerce  
 Trade  
    Ancillary and Auxiliaries to Trade   
 Relationship between Industry, Trade and Commerce 
? Two Sector Classification 
 Manufacturing Sector 
 Service Sector 
                     Meaning 
                     Features of Service 
                    Types of Services 
                     Products VS. Services 
                                         Importance of Service 
                    Growth of Service Sector in India 
                                     Indicators of growth 
                                 Reasons for growth 
                                  Implications of growth 
? Summary  
? Exercises 
? Glossary 
? References  
          
 
Foundations Of The Spectrum Of Indian Business 
 
3 
Institute of Lifelong Learning, University of Delhi 
Learning Outcomes     
 
After studying this chapter you should be able to 
 
? Understand the concept of business and foundations of Indian business 
? Understand the relationship among industry, trade and commerce 
? Identify the features of business 
? Understand the spectrum of business activities 
? Understand the complimentary relationship between manufacturing and service 
sector 
? Understand the concept of service and service sector 
? Appreciate the reasons of growth and implications of its growth. 
 
 
 
 
 
 
Introduction     
      Industry                         Commerce 
Trade                  Environment 
 
                                         Business 
India is becoming a dream land for the people who are eager to set up business for profit 
whether it is home land or a foreign land. This world wide acceptance may be because of 
availability of huge market, abundance of resources, availability of workers with advanced 
technical skills at relatively low cost, ever evolving and liberalized economic environment 
with transformed and improved infrastructure. 
Indian business has come a long way from disorganized to organized one. Origin of Indian 
business lies in ‘Haats’(bazaars where people from neighboring places used to come for 
buying and selling the manufactured products ), carnivals and local weekly bazaars, where 
consumers could get every thing they needed for their daily use through the barter system 
initially followed by the monetary exchange system. And these are popular even today all 
over India.  
The people coming for selling their products managed the entire manufacturing themselves 
within their family carrying it to the next generation. As such they enjoyed fruits of 
Page 4


Foundations Of The Spectrum Of Indian Business 
 
1 
Institute of Lifelong Learning, University of Delhi 
 
 
 
 
 
 
 
Subject: Commerce 
 
Lesson:  Foundations Of The Spectrum Of Indian Business 
Course Developer: Romila Aggarwal  
College / Department: Bharati College,  
University of Delhi  
 
 
Foundations Of The Spectrum Of Indian Business 
 
2 
Institute of Lifelong Learning, University of Delhi 
Table of Contents 
 
? Introduction 
? A Brief History of Indian Business  
? What is Business? 
 Relationship between Business, Profession and Employment  
 Relationship between Business and Commerce   
? Spectrum of Business Activities  
 Industry    
 Commerce  
 Trade  
    Ancillary and Auxiliaries to Trade   
 Relationship between Industry, Trade and Commerce 
? Two Sector Classification 
 Manufacturing Sector 
 Service Sector 
                     Meaning 
                     Features of Service 
                    Types of Services 
                     Products VS. Services 
                                         Importance of Service 
                    Growth of Service Sector in India 
                                     Indicators of growth 
                                 Reasons for growth 
                                  Implications of growth 
? Summary  
? Exercises 
? Glossary 
? References  
          
 
Foundations Of The Spectrum Of Indian Business 
 
3 
Institute of Lifelong Learning, University of Delhi 
Learning Outcomes     
 
After studying this chapter you should be able to 
 
? Understand the concept of business and foundations of Indian business 
? Understand the relationship among industry, trade and commerce 
? Identify the features of business 
? Understand the spectrum of business activities 
? Understand the complimentary relationship between manufacturing and service 
sector 
? Understand the concept of service and service sector 
? Appreciate the reasons of growth and implications of its growth. 
 
 
 
 
 
 
Introduction     
      Industry                         Commerce 
Trade                  Environment 
 
                                         Business 
India is becoming a dream land for the people who are eager to set up business for profit 
whether it is home land or a foreign land. This world wide acceptance may be because of 
availability of huge market, abundance of resources, availability of workers with advanced 
technical skills at relatively low cost, ever evolving and liberalized economic environment 
with transformed and improved infrastructure. 
Indian business has come a long way from disorganized to organized one. Origin of Indian 
business lies in ‘Haats’(bazaars where people from neighboring places used to come for 
buying and selling the manufactured products ), carnivals and local weekly bazaars, where 
consumers could get every thing they needed for their daily use through the barter system 
initially followed by the monetary exchange system. And these are popular even today all 
over India.  
The people coming for selling their products managed the entire manufacturing themselves 
within their family carrying it to the next generation. As such they enjoyed fruits of 
Foundations Of The Spectrum Of Indian Business 
 
4 
Institute of Lifelong Learning, University of Delhi 
specialization in one product or one product line from generation to generation. The quality 
products would get fame by word of mouth.  
Business men always travelled long distances for local, national or international business. 
They managed trade and commerce on their own and had no personal or financial security. 
Business was full of risks without any insurance cover.  
Gradually business evolved from Haats to local markets, local markets to big super markets 
and now to hypermarkets. The ownership also shifted from individuals to family owned, 
from family owned to partnerships, from partnership to private companies, from private 
companies to public limited companies. About these forms of organization you will be 
studying later in unit 3. The scale of business changed from very small to small, small to 
medium, from medium to large and from large to mega businesses. Business has acquired a 
wide spectrum. Manufacturing, commerce, trade and its auxiliaries and ancillaries (which 
were once part of the same business entity) developed separately and are being managed 
and owned by different entities. The kinds of risks have changed and they are now covered 
by insurance. The business evolved from mercantile to industrial capitalism. 
 
 A Brief History: how and why this happened? 
Value addition: Focus of the Section 
A Brief History of Indian Business 
This section outlines the brief history of the basic foundation of Indian business. It 
describes the peculiar nature and the evolution of Indian business. It also explains 
how Indian business took different turns. It developed from Haats to mega super 
bazars, and from manufacturing at small scale to industrial capitalism. 
The purpose is to familiarize you with the concept of origin of Indian business, relate it 
to the transformation of family controlled business to empires and appreciate the 
strength of foundation.  
 
India and china were world famous and well known for manufacturing products. They were 
the largest manufacturing economies during the eighteenth century. Though, in India it was 
in the hands of small but skilled artisans almost in its entirety.  
It was because the rich and powerful merchants were not motivated to manufacture 
because of many facts: the fragmented and distant markets, lawlessness, inadequate 
transport facilities, absence of any security of their products and lives in transit and to their 
families at their back together with disregard for property rights during Mughal rule and not 
because of a cultural or religious aversion to capitalism as many thinkers had pointed it for 
the subcontinent.  
With the advent of East India Company (EIC), the situation changed as the British built 
transport infrastructure, abolished internal customs tariffs, introduced currency and banking 
reforms and established a legal system enforcing property rights and eliminating the 
chances of government to act arbitrarily. The changes were introduced specifically for the 
benefit of the British rule but accidently, this provided a climate for flourishing of modern 
entrepreneurship and Indian merchants were motivated to give their services to the rising 
British power. 
The business in India primarily concentrated on trading and money lending till the mid 19
th
 
century. The investment in technological innovations also was not the favourite cup of tea 
for long for the Indian business elite. However they emulated the practices, behavior and 
institutions of the ruler and believed that they would have an easy access to foreign 
technology, which did not proved to be true. 
Page 5


Foundations Of The Spectrum Of Indian Business 
 
1 
Institute of Lifelong Learning, University of Delhi 
 
 
 
 
 
 
 
Subject: Commerce 
 
Lesson:  Foundations Of The Spectrum Of Indian Business 
Course Developer: Romila Aggarwal  
College / Department: Bharati College,  
University of Delhi  
 
 
Foundations Of The Spectrum Of Indian Business 
 
2 
Institute of Lifelong Learning, University of Delhi 
Table of Contents 
 
? Introduction 
? A Brief History of Indian Business  
? What is Business? 
 Relationship between Business, Profession and Employment  
 Relationship between Business and Commerce   
? Spectrum of Business Activities  
 Industry    
 Commerce  
 Trade  
    Ancillary and Auxiliaries to Trade   
 Relationship between Industry, Trade and Commerce 
? Two Sector Classification 
 Manufacturing Sector 
 Service Sector 
                     Meaning 
                     Features of Service 
                    Types of Services 
                     Products VS. Services 
                                         Importance of Service 
                    Growth of Service Sector in India 
                                     Indicators of growth 
                                 Reasons for growth 
                                  Implications of growth 
? Summary  
? Exercises 
? Glossary 
? References  
          
 
Foundations Of The Spectrum Of Indian Business 
 
3 
Institute of Lifelong Learning, University of Delhi 
Learning Outcomes     
 
After studying this chapter you should be able to 
 
? Understand the concept of business and foundations of Indian business 
? Understand the relationship among industry, trade and commerce 
? Identify the features of business 
? Understand the spectrum of business activities 
? Understand the complimentary relationship between manufacturing and service 
sector 
? Understand the concept of service and service sector 
? Appreciate the reasons of growth and implications of its growth. 
 
 
 
 
 
 
Introduction     
      Industry                         Commerce 
Trade                  Environment 
 
                                         Business 
India is becoming a dream land for the people who are eager to set up business for profit 
whether it is home land or a foreign land. This world wide acceptance may be because of 
availability of huge market, abundance of resources, availability of workers with advanced 
technical skills at relatively low cost, ever evolving and liberalized economic environment 
with transformed and improved infrastructure. 
Indian business has come a long way from disorganized to organized one. Origin of Indian 
business lies in ‘Haats’(bazaars where people from neighboring places used to come for 
buying and selling the manufactured products ), carnivals and local weekly bazaars, where 
consumers could get every thing they needed for their daily use through the barter system 
initially followed by the monetary exchange system. And these are popular even today all 
over India.  
The people coming for selling their products managed the entire manufacturing themselves 
within their family carrying it to the next generation. As such they enjoyed fruits of 
Foundations Of The Spectrum Of Indian Business 
 
4 
Institute of Lifelong Learning, University of Delhi 
specialization in one product or one product line from generation to generation. The quality 
products would get fame by word of mouth.  
Business men always travelled long distances for local, national or international business. 
They managed trade and commerce on their own and had no personal or financial security. 
Business was full of risks without any insurance cover.  
Gradually business evolved from Haats to local markets, local markets to big super markets 
and now to hypermarkets. The ownership also shifted from individuals to family owned, 
from family owned to partnerships, from partnership to private companies, from private 
companies to public limited companies. About these forms of organization you will be 
studying later in unit 3. The scale of business changed from very small to small, small to 
medium, from medium to large and from large to mega businesses. Business has acquired a 
wide spectrum. Manufacturing, commerce, trade and its auxiliaries and ancillaries (which 
were once part of the same business entity) developed separately and are being managed 
and owned by different entities. The kinds of risks have changed and they are now covered 
by insurance. The business evolved from mercantile to industrial capitalism. 
 
 A Brief History: how and why this happened? 
Value addition: Focus of the Section 
A Brief History of Indian Business 
This section outlines the brief history of the basic foundation of Indian business. It 
describes the peculiar nature and the evolution of Indian business. It also explains 
how Indian business took different turns. It developed from Haats to mega super 
bazars, and from manufacturing at small scale to industrial capitalism. 
The purpose is to familiarize you with the concept of origin of Indian business, relate it 
to the transformation of family controlled business to empires and appreciate the 
strength of foundation.  
 
India and china were world famous and well known for manufacturing products. They were 
the largest manufacturing economies during the eighteenth century. Though, in India it was 
in the hands of small but skilled artisans almost in its entirety.  
It was because the rich and powerful merchants were not motivated to manufacture 
because of many facts: the fragmented and distant markets, lawlessness, inadequate 
transport facilities, absence of any security of their products and lives in transit and to their 
families at their back together with disregard for property rights during Mughal rule and not 
because of a cultural or religious aversion to capitalism as many thinkers had pointed it for 
the subcontinent.  
With the advent of East India Company (EIC), the situation changed as the British built 
transport infrastructure, abolished internal customs tariffs, introduced currency and banking 
reforms and established a legal system enforcing property rights and eliminating the 
chances of government to act arbitrarily. The changes were introduced specifically for the 
benefit of the British rule but accidently, this provided a climate for flourishing of modern 
entrepreneurship and Indian merchants were motivated to give their services to the rising 
British power. 
The business in India primarily concentrated on trading and money lending till the mid 19
th
 
century. The investment in technological innovations also was not the favourite cup of tea 
for long for the Indian business elite. However they emulated the practices, behavior and 
institutions of the ruler and believed that they would have an easy access to foreign 
technology, which did not proved to be true. 
Foundations Of The Spectrum Of Indian Business 
 
5 
Institute of Lifelong Learning, University of Delhi 
Yet Indian business kept on developing and taking new turns in every odd. It had huge 
potential and market inside and outside the national boundaries. Parsees like the Tatas 
formed a cotton textile industry in western part of India. However, a distinctive system 
known as "managing agency" system emerged in India to overcome the shortage of capital 
and managerial skills. With the result of this development of management contracts brought 
by entrepreneurs in India, families could control numerous independent joint-stock 
industries in diversified activities with outside shareholders. Indian-owned business showed 
remarkable growth from the First World War. And the modern industrialization spread all 
over from the small confines of western and eastern regions. This worked as the foundation 
stone for building business empires. 
The entry of the Marwaris
1
 in the business arena proved to be a major turning point in the 
growth of Indian business. Ghanshyam Das Birla led the Marwari community to make first 
sustained manufacturing investments. He learnt and applied modern business methods to 
make India a powerhouse and also grow his big empire. During the interwar years all these 
business stalwarts increased their manufacturing investments to a great extent even by 
buying the shares of British companies. Investments were also made in new industries like 
sugar, paper, shipping and chemicals. The British incumbents were challenged in jute and 
coal by these enthusiastic and enterprising entrepreneurs. The growth of the Birlas and 
other Marwaris could not deter Tatas from retaining its eminent place. They built a giant 
diversified business empire, and even launched an airline in the mid-1930s. Tata and Birla 
remained synonym to popular and big business tycoons. They also had been returning their 
profits to the society by way of schools, colleges, dharamshalas, temples etc.  
The long-established British expatriate business houses were growing at a slower pace in 
contrast to the Indian firms. The slower pace, the growth of nationalism and growing 
political risk did not stop the established British managing agencies from investing in new 
industries. The new wave of Western multinational investors such as Dunlop, Philips, 
Imperial Tobacco, Unilever and ICI entered into the Indian business scene. These held 
stronger competitive advantages in high technology and branded consumer goods. British 
expatriate firms did not suddenly divest from independent India in 1947. Some of the long-
established firms e.g. Parry’s and Binny's became Indian registered companies. Many made 
new investments. Subsequently all of the former British business houses were either 
acquired by Indian investors or the government, though the process took long.  
 
In spite of several government controls and restrictions, adoption of socialism as the 
national goal and problems arising due to family succession issues Indian capitalism thrived 
after independence i.e. 1947.  
 
Profitable opportunities were created by the highly protected market system.  Many new 
Marwari families e.g. the Goenkas and Khaitans together with other new business groups 
rapidly built empires on acquiring former British assets. The era witnessed success of many 
entrepreneurial setups like that of Karsanblai Patel's Nirma Industries. Nirma industries 
challenged the long-established multinational giant Unilever strong hold on the Indian 
market by introducing a game-changing low-priced detergent and making a hole in its profit 
kitty with its unique niche marketing strategy. Policy liberalization after 1991 opened the 
flood gates of new opportunities, especially in information technologies. The firms such as 
                                                
1
 The Marwaris were émigrés from Rajasthan who had built extensive trading, money lending and 
brokerage businesses, especially in Bengal, and by the end of the nineteenth century already 
dominated the domestic trade in raw jute.