Micro Notes Plus One Business Studies

📘 Chapter 1: NATURE AND PURPOSE OF BUSINESS

Important trading centres (ancient India)

• Pataliputra: commercial town – export of stones.
• Peshawar: exporting wool & import of horses.
• Taxila: city of financial and commercial banks.
• Indraprastha: commercial junction.
• Mathura: emporium of trade.
• Varanasi: centre of textile industry.
• Mithila: established trading colonies in China.
• Surat: emporium of western trade.
• Kanchi: pearls, glass and rare stones.
• Madura: overseas trade.

Business, Profession, Employment – Comparison

Basis	Business	Profession	Employment
Decision of entrepreneur	Own decision	Membership of professional body	Appointment letter
Nature of work	Production or purchase and sale of goods/services	Rendering expert service	Job assigned by the employer
Qualification	No minimum qualification	Professional qualification	Prescribed by employer
Capital	Depends on nature of business	Limited capital	No capital
Risk	High risk	Less risk	No risk
Transfer	Possible	Not possible	Not possible
Return	Profit	Fees	Salary
Code of conduct	No code	Laid down by professional body	Laid down by employer

Objectives of Business

1. Earning Profit
2. Market standing
3. Innovation
4. Productivity
5. Efficient utilization of physical and financial resources
6. Manager performance and development
7. Improve workers performance and attitude
8. Social responsibility

Business Risk

Possibility of inadequate profits or even losses due to uncertainties.

Causes of Business Risk

1. Natural causes: heavy rain, famine, fire, etc.
2. Human causes: theft, strike, lockout, riots etc.
3. Economic causes: change in demand and price, market conditions, competitions, etc.
4. Political causes: changes in government policies, licensing policy, etc.
5. Management causes: poor planning, absence of research & development, mismanagement etc.

Role of profit in Business

Source of income, reward for risk, survival of business, growth and development, reputation of business.

Classification of business activities

A. Industry – production/processing of goods.

• Primary Industry: extraction of natural resources & reproduction of living organisms.
  • Extractive industry: fishing, mining, oil
  • Genetic industries: agriculture, dairy farming, poultry
• Secondary Industries: deals with materials extracted at primary stage.
  • Manufacturing industries: raw materials into finished goods.
    • Analytical industry: petroleum
    • Synthetic Industry: soap, paint
    • Processing industry: textile
    • Assembling Industry: cycle industry
  • Construction industries: dams, bridges, airports
• Tertiary industries: support primary and secondary (transport, banking).

B. Commerce = Trade + Aids to trade.

• Trade: sale, exchange or transfer of goods on regular basis.
  • Home trade: wholesale, retail
  • Foreign trade: export, import, entrepot
• Aids to trade: banking, transportation, communication, insurance, advertising, warehousing, packaging.

Starting a Business – Basic Factors

Line of business, Size, Form of ownership, Location, Finance, Physical facilities, Plant layout, Workforce.

📘 Chapter 2: FORMS OF BUSINESS ORGANISATION

🔹 SOLE PROPRIETORSHIP

Definition: Owned, managed and controlled by a single person.

Features

• One man ownership & control
• Formation & closure easy
• Lack of business continuity
• Unlimited liability
• No separate entity
• No profit sharing

Merits

• Quick decision making
• Secrecy
• Direct incentive
• Ease of formation & closure

Demerits

• Limited resources
• Unlimited liability
• Limited managerial ability

🔹 HINDU UNDIVIDED FAMILY (HUF)

Owned and carried on by members of Hindu undivided family.

Features

• Governed by Hindu Succession Act, 1956
• Liability of members (except karta) limited
• Control lies with karta
• Business continues even after death of karta
• Minors can be members

Advantages

• Effective control
• Limited liability for coparceners
• Loyalty & cooperation

Disadvantages

• Limited resources
• Unlimited liability of karta
• Dominance of karta

🔹 PARTNERSHIP

Relation between persons who agree to share profits.

Features

• Formation through legal agreement
• Sharing profit/loss in agreed ratio
• Mutual agency
• Unlimited liability
• Lack of continuity

Partnership Deed

Written agreement containing: Name of firm & partners, Nature & place of business, Duration, capital contribution, Profit sharing ratio.

Types of Partners

• Active partner: contributes capital, takes part
• Sleeping partner: capital only, no active role
• Nominal partner: lends name only
• Partner by estoppels: by conduct
• Partner by holding out: does not deny
• Secret partner: association unknown to public

Minor as Partner

Can be admitted only to benefits; liability limited to share; can share profits.

Advantages of Partnership

• Ease of formation & closure
• Better management
• More capital
• Risk shared

Limitations

• Unlimited liability
• Limited resources
• Possibility of conflicts
• Lack of continuity

🔹 JOINT STOCK COMPANY

Artificial person created by law, separate entity, perpetual succession, common seal.

Merits

• Limited liability
• Shares easily transferable
• Scope for expansion
• Professional management

Limitations

• Difficulty in formation
• Lack of secrecy
• Numerous regulations
• Delay in decisions

PRIVATE COMPANY vs PUBLIC COMPANY

Basis	Private Company	Public Company
Min members	2	7
Max members	200	No limit
Directors	Two	Three
Min capital	1 lakh	5 lakh
Prospectus	Not needed	Needed
Share transfer	Restricted	Free
Suffix	Pvt. Ltd.	Ltd.

🔹 CO-OPERATIVE SOCIETY

Self-help through mutual help; motto "each for all & all for each". (Co-operative Societies Act, 1912)

Features

• Voluntary association
• Open membership
• Limited liability
• One man one vote
• Service motive

Merits

• Equality in voting
• Limited liability
• Stable existence
• Government support

Demerits

• Limited resources
• Inefficiency in management
• Lack of secrecy
• Government control

Types of Co-operative Societies

• Consumer's co-operative
• Producer's co-operative
• Co-operative marketing
• Co-operative credit
• Co-operative farming
• Co-operative housing

⚙️ Choice of Form – Factors

• Cost
• Easy formation
• Liability
• Continuity
• Capital
• Management ability
• Degree of control
• Nature of business

📊 QUICK COMPARISON

Form	Liability	Continuity	Members
Sole prop.	Unlimited	Ends with owner	1
HUF	Karta unlimited; others limited	Continues	Coparceners
Partnership	Unlimited	Dissolves on death/retirement	Min 2, Max 50
Private Co.	Limited	Perpetual	2-200
Public Co.	Limited	Perpetual	Min 7, no max
Co-op Society	Limited	Stable	Min 10

📘 Chapter 3: PRIVATE, PUBLIC AND GLOBAL ENTERPRISES

🔹 Public Sector Undertakings (PSU)

Organizations owned & managed by government – partly or wholly owned by central/state government.

1. Departmental Undertaking

Managed by a ministry; part of government department. Examples: All India Radio, Doordarshan, Post & Telegraph, Indian Railways, Electricity, Defence.

• Advantages: Government control, secrecy, easy financing, public accountability.
• Disadvantages: Political interference, red tapism, lack of flexibility & initiative.

2. Statutory Corporation (Public Corporation)

Created by a Special Act of Parliament or State Legislature. Examples: RBI, LIC, Air India, ONGC, IFC, SBI, UTI, KSRTC.

• Advantages: Autonomy, quick decisions, financial independence, efficient staff, public interest protection.
• Disadvantages: Government interference, absence of competition, inefficiency, corruption chance.

3. Government Company

Registered under Companies Act; at least 51% paid-up capital held by government. Examples: SAIL, BHEL, Hindustan Aeronautics Ltd.

• Merits: Separate legal entity, can raise funds from private, less government interference.
• Limitations: Still subject to audit and parliamentary scrutiny.

Comparison of PSU Forms

Feature	Departmental	Statutory Corp	Government Co.
Establishment	Order of Ministry	Special Act	Companies Act
Legal entity	Part of Government	Separate	Separate
Ownership	Wholly Government	Wholly Government	≥51% Govt
Management	Govt. officials	Nominated board	Board (incl. private)
Employees	Govt. servants	Not govt. servants	Not govt. servants
Autonomy	None	Sufficient	Some
Financing	Budget grants	Own revenue + borrowings	Private financing possible

🔹 Global Enterprises (MNCs)

Examples: General Motors, Cadbury, Brook Bond. Features: Huge capital resources, Foreign collaboration, Advanced technology, International market, Product innovation, Aggressive marketing strategies, Centralised control.

🔹 PUBLIC PRIVATE PARTNERSHIP (PPP)

Relationship between public and private entities in infrastructure and other services. Public sector ensures social obligations; private sector brings expertise, innovation. Sectors: power, water, pipelines, hospitals, schools, stadiums, air traffic control, prisons, railways, roads, billing, IT systems.

📊 QUICK COMPARISON – PSU FORMS

Form	Advantages	Disadvantages
Departmental	Government control, secrecy	Political interference, red tapism
Statutory Corp	Autonomy, financial independence	Govt. interference, inefficiency
Government Co.	Legal entity, private participation	Less autonomy, subject to audit
Global Enterprise	Huge capital, innovation, global reach	Centralised control, may ignore local needs

📘 Chapter 4: BUSINESS SERVICES

🔹 Nature of Services (5 I's)

• Intangibility – cannot be touched, only experienced.
• Inconsistency – varies with provider/customer.
• Inseparability – production & consumption simultaneous.
• Inventory (less) – cannot be stored.
• Involvement – customer participates in delivery.

Difference between Goods and Services

Basis	Goods	Services
Nature	Physical object	Activity / process
Tangibility	Tangible	Intangible
Homogeneity	Homogeneous	Heterogeneous
Production & consumption	Separated	Simultaneous
Storage	Can be stored	Cannot be stored
Customer involvement	Not required	Essential

🔹 Types of Services

• Business services – banking, insurance, transport, warehousing, communication.
• Social services – health, education (NGOs, government)
• Personal services – tourism, restaurants

🔹 BANKING

Definition: Accepting deposits for lending/investment, repayable on demand, withdrawable by cheque.

Types of Banks

• Commercial banks – public (SBI, PNB) & private (HDFC, ICICI)
• Cooperative banks – rural credit
• Specialised banks – EXIM, industrial banks
• Central Bank – RBI

Functions of Commercial Banks

• Acceptance of deposits: Fixed, savings, current, recurring
• Lending of funds: Overdraft, cash credit, loans, discounting bills
• Cheque facility: Bearer / Crossed
• Remittance of funds: Bank drafts, NEFT, RTGS
• Allied services: Bill payments, locker, underwriting

e-Banking

Banking using electronic media. Benefits: 24×7 access, transparency, financial discipline, customer satisfaction.

🔹 INSURANCE

Definition: Contract where insurer agrees to compensate loss from uncertain event in exchange for premium.

Functions of Insurance

• Providing certainty, Protection, Risk sharing, Capital formation

Principles of Insurance

• Utmost good faith (uberrimae fidei): Full disclosure of material facts.
• Insurable interest: Financial interest in subject matter.
• Indemnity: Compensate actual loss (not in life insurance).
• Proximate cause (causa proxima): Nearest/dominant cause of loss.
• Subrogation: Insurer’s right to ownership after claim.
• Contribution: Insurers share loss if multiple policies.
• Mitigation: Insured must minimise loss.

Types of Insurance

Life Insurance

Contract to pay sum on death or maturity. Not a contract of indemnity. Types: Whole life, Endowment, Joint life, Annuity, Children's endowment.

Fire Insurance

Contract of indemnity; covers loss/damage by fire.

Marine Insurance

Covers ship (hull), cargo, freight against sea perils.

📊 Life vs Fire vs Marine Insurance

Basis	Life	Fire	Marine
Subject Matter	Human life	Property/assets	Ship, cargo, freight
Indemnity	Not applicable	Applicable	Applicable
Duration	Long period	One year	One year/voyage
Insurable interest	At time of policy	At policy & loss	At time of loss

🔹 COMMUNICATION SERVICES

Postal Services

• Financial facilities: PPF, KVP, NSC, money orders
• Mail facilities: parcel, registered post, insured post
• Other: greeting post, speed post, e-bill post, passport services

Telecom Services

• Cellular mobile, Fixed line, Cable, VSAT, DTH

🔹 WAREHOUSING

Scientific storage. Types: Private, Public, Bonded, Government, Cooperative.

Functions of Warehousing

• Consolidation, Break the bulk, Stock piling, Value added services, Price stabilisation, Financing

📘 Chapter 5: EMERGING MODES OF BUSINESS

Definition

e-Business: Conduct of industry, trade and commerce using computer networks.

e-Commerce: Subset of e-business; firm's interactions with customers and suppliers over the internet.

Scope of e-Business

• B2B (Business to Business): Transactions between businesses.
• B2C (Business to Consumer): Firm to customer transactions.
• Intra-B Commerce: Internal interactions among departments/employees.
• C2C (Consumer to Consumer): Transactions between consumers (e.g., OLX, eBay).

Benefits of e-Business

• Ease of formation & lower investment
• Convenience – 24×7×365 access
• Speed – instant information exchange
• Global reach / access
• Movement towards paperless society

Limitations

• Low personal touch
• Incongruence between order and delivery speed
• Need for technology competence
• Increased risk due to anonymity
• People resistance to change
• Ethical fallouts

Online Transactions – Procedure

1. Registration – Create account with vendor (password protected).
2. Placing order – Add items to shopping cart, then checkout.
3. Payment mechanism – Cash on delivery, cheque, net banking, credit/debit card, digital cash.

Security & Safety Risks

• Transaction risks: Default on order, delivery, or payment.
• Data storage/transmission risks: Hacking, virus, data theft.
• Threat to intellectual property & privacy: Unauthorized copying, spam.

Traditional Business vs e-Business

Basis	Traditional	e-Business
Formation	Difficult	Simple
Physical presence	Required	Not required
Location importance	High	None
Cost of setting up	High	Low
Operating cost	High	Low
Nature of contact	Indirect	Direct
Response time	Long	Instant
Global reach	Less	Much
Transaction risk	Low	High

📘 Chapter 6: SOCIAL RESPONSIBILITIES OF BUSINESS & BUSINESS ETHICS

Concept of Social Responsibility

Obligation of business to take decisions and actions desirable in terms of society's objectives and values. Broader than legal responsibility – includes voluntary actions for social benefit.

Arguments FOR social responsibility

• Justification for existence & growth
• Long-term interest of firm
• Avoidance of government regulation
• Maintenance of society
• Availability of resources with business
• Converting problems into opportunities
• Better environment for doing business
• Holding business responsible for social problems

Arguments AGAINST social responsibility

• Violation of profit maximisation objective
• Burden on consumers (cost passed on)
• Lack of social skills
• Lack of broad public support

Kinds of Social Responsibility

• Economic responsibility: Produce goods/services society wants, at a profit.
• Legal responsibility: Operate within the laws of the land.
• Ethical responsibility: Behaviour expected by society but not codified in law.
• Discretionary responsibility: Voluntary obligations (e.g., charitable contributions).

Responsibility towards Different Groups

• Owners/shareholders: Fair return, safety of investment, accurate information.
• Workers: Meaningful work, fair wages, good working conditions, union rights.
• Consumers: Right quality & quantity, reasonable prices, avoid adulteration, honest advertising.
• Government & community: Pay taxes regularly, obey laws, protect environment, be a good citizen.

Business and Environmental Protection

Environment: Totality of man's surroundings (natural + man-made). Pollution: Injection of harmful substances into environment.

Causes of Pollution

• Air pollution: Carbon monoxide from automobiles, smoke from factories.
• Water pollution: Chemical and waste dumping into rivers, lakes.
• Land pollution: Dumping of toxic wastes on land.
• Noise pollution: Unwanted sound from factories, vehicles.

Need for Pollution Control

• Reduction of health hazards, Reduced risk of liability, Cost savings, Improved public image, Other social benefits.

Role of Business

• Top management commitment, Clear policies & programmes, Complying with laws, Participation in government programmes, Periodical assessment, Educational workshops & training.

Business Ethics

Concept: Socially determined moral principles which should govern business activities. Examples: fair prices, accurate weights, fair treatment to workers, reasonable profits.

Elements of Business Ethics

• Top management commitment
• Publication of a 'Code'
• Establishment of compliance mechanisms
• Involving employees at all levels
• Measuring results

📘 Chapter 7: FORMATION OF A COMPANY

Stages of Formation

1. Promotion – Idea conceiving, feasibility studies, name approval, preparing preliminary documents, fixing signatories, appointment of professionals.
2. Incorporation – Registration with ROC, submission of documents (MOA, AOA, etc.), receipt of Certificate of Incorporation (birth certificate).
3. Capital Subscription – For public companies: SEBI approval, prospectus, minimum subscription (90% of issue), appointment of bankers/brokers/underwriters, stock exchange listing.

Promoter

Person who takes all preliminary work for starting a new company. Functions: identification of business opportunity, feasibility studies (technical, financial, economic), name approval, preparing documents, fixing signatories, appointment of professionals.

Documents for Incorporation

• Memorandum of Association (MOA) – Charter of the company, defines objectives. Clauses: Name clause, Registered office clause, Object clause, Liability clause, Capital clause, Subscription clause.
• Articles of Association (AOA) – Rules and regulations for internal management.
• Prospectus – Invitation to public to subscribe shares/debentures. (Not required for private company)
• Statement in Lieu of Prospectus (if capital raised privately)
• Written consent of proposed directors
• Agreement with directors/managers
• Statutory declaration of compliance

Difference between MOA and AOA

Basis	Memorandum of Association	Articles of Association
Objectives	Defines objectives of the company	Rules for internal management
Position	Main document, charter	Subordinate to MOA
Relationship	With outsiders	With members
Validity	Acts beyond MOA are invalid	Acts beyond AOA can be ratified
Necessity	Every company must have	Not compulsory for a public company (can adopt Table A)

One Person Company (OPC)

Company with only one member; introduced by Companies Act 2013. Only Indian citizen and resident can start. Cannot carry out Non-Banking Financial Investment activities.

📘 Chapter 8: SOURCES OF BUSINESS FINANCE

Meaning & Classification

Business finance = money required for business activities. Needs: Fixed capital (long-term assets) and Working capital (day-to-day operations).

Classification of Sources

• Period basis: Long-term (≥5 yrs), Medium-term (1-5 yrs), Short-term (≤1 yr).
• Ownership basis: Owner's funds (equity, retained earnings), Borrowed funds (debentures, loans).
• Source of generation basis: Internal (retained earnings), External (shares, debentures, banks).

Sources of Finance

• Retained Earnings (Ploughing back of profits): Permanent source, no explicit cost, but may cause shareholder dissatisfaction.
• Trade Credit: Credit from suppliers, convenient but limited and costly.
• Factoring: Selling receivables to factor, accelerates cash flow, but expensive for small invoices.
• Lease Financing: Renting asset, lower investment, tax deductible rentals, but lessee never becomes owner.
• Public Deposits: Deposits from public, simple procedure, but unreliable for new companies.
• Commercial Paper (CP): Unsecured promissory note, high liquidity, only for highly rated firms.
• Issue of Shares: Equity (ownership, voting rights, no fixed dividend) and Preference (fixed dividend, preferential claim).
• Debentures: Loan capital, fixed interest, tax deductible, but permanent burden.
• Commercial Banks: Short/medium term loans, flexible but require security.
• Financial Institutions: IDBI, IFCI, etc., provide long-term funds, but rigid criteria.
• International Financing: GDR, ADR, FCCB, IDR – raise funds from global markets.

Factors affecting choice of source

• Cost, Financial strength, Form of organisation, Purpose & time period, Risk, Control, Tax benefits.

📘 Chapter 9: MSME AND BUSINESS ENTREPRENEURSHIP

MSME – Definition (MSMED Act 2006)

Type	Investment (₹)	Turnover (₹)
Micro	≤ 1 crore	≤ 5 crore
Small	≤ 10 crore	≤ 50 crore
Medium	≤ 50 crore	≤ 250 crore

Village industries: located in rural area, fixed capital per worker ≤ ₹50,000. Cottage industries: rural/traditional, family labour, small capital.

Role of MSME in India

• 95% of industrial units
• Second largest employer (after agriculture)
• Labour intensive, less capital intensive
• Produces variety of products – consumer goods to sophisticated items
• Balanced regional development, uses local resources
• Low cost of production, quick decisions

Problems of MSME

• Finance: Inadequate capital, lack of creditworthiness.
• Raw materials: Scarcity, high price, low bargaining power.
• Managerial skills: Lack of professional managers.
• Marketing: Weak area, dependence on middlemen.
• Quality: Poor quality, lack of resources for R&D.
• Capacity utilisation: Operate below full capacity.
• Technology: Outdated technology.

Entrepreneurship

Process of setting up one's own business. Characteristics: Systematic activity, Lawful & purposeful, Innovation, Organisation of production, Risk-taking.

Startup India Scheme

Initiative to nurture innovation and startups. Annual turnover ≤ ₹25 crore. Aims: entrepreneurial culture, awareness, motivate youth, promote women/SC/ST.

Intellectual Property Rights (IPR)

• Copyright: Literary, artistic, musical works; automatic protection.
• Trademark: Word, name, symbol to identify goods.
• Geographical Indication (GI): Indicates origin (e.g., Darjeeling Tea).
• Patent: Exclusive right for invention (new, non-obvious, industrial application). 20 years protection.
• Design: Shape, pattern, arrangement (aesthetic). 10+5 years.
• Plant Variety: Protection for new plant varieties.
• Semiconductor IC Layout Design: For chip designs.

📘 Chapter 10: INTERNAL TRADE

Meaning of Internal Trade

Buying and selling of goods and services within the boundaries of a nation. Two categories: Wholesale trade and Retail trade.

Wholesale Trade

Buying and selling in large quantities for resale or intermediate use.

Services of Wholesalers

• To Manufacturers: Facilitating large scale production, Bearing risk, Financial assistance, Expert advice, Help in marketing functions, Storage.
• To Retailers: Availability of goods, Marketing support, Grant of credit, Specialised knowledge, Risk sharing.

Retail Trade

Sale of goods directly to ultimate consumers.

Services of Retailers

• To Manufacturers/Wholesalers: Help in distribution, Personal selling, Enabling large scale operations, Collecting market information, Help in promotion.
• To Consumers: Regular availability, New products information, Convenience in buying, Wide selection, After-sales services, Credit facilities.

Types of Retailers

A. Itinerant Retailers (no fixed place): Peddlers & Hawkers, Market traders, Street traders, Cheap jacks.

B. Fixed Shop Retailers:

• Small retailers: General stores, Speciality shops, Street stall holders, Second-hand goods shops, Single line stores.
• Large retailers: Departmental stores, Chain stores (Multiple shops), Mail order houses, Consumer cooperative stores, Super markets, Vending machines.

Departmental Stores vs Multiple Shops

Basis	Departmental Store	Chain / Multiple Shops
Location	Central place	Many localities
Range	Wide variety	Limited line
Services	Maximum	Limited
Pricing	Not uniform	Uniform fixed prices
Credit	Sometimes	Cash only

Goods and Services Tax (GST)

Introduced July 1, 2017 – 'One Nation, One Tax'. Destination-based consumption tax. Slabs: 0%, 5%, 12%, 18%, 28%. CGST + SGST + IGST. Input tax credit avoids cascading effect.

📘 Chapter 11: INTERNATIONAL BUSINESS

Meaning of International Business

Business activities crossing national frontiers – includes trade (goods & services), capital, personnel, technology, IP rights. Broader than international trade – includes foreign investment, licensing, franchising.

Reasons for International Business

• Unequal distribution of natural resources, Differences in productivity & production costs, Geographical specialisation.

Domestic vs International Business

Basis	Domestic	International
Nationality of buyers/sellers	Same country	Different countries
Mobility of factors	High within country	Restricted across borders
Customer homogeneity	Relatively homogeneous	Heterogeneous
Political system & risk	Single country, known risks	Multiple systems, higher political risk
Currency	Domestic currency	Multiple currencies, exchange rate risk

Scope of International Business

• Merchandise exports & imports
• Service exports & imports (invisible trade)
• Licensing & franchising
• Foreign investments: FDI (controlling interest) & FPI (portfolio)

Benefits of International Business

To Nations

• Earning foreign exchange, More efficient use of resources, Improves growth & employment, Increases standard of living.

To Firms

• Prospects for higher profits, Increased capacity utilisation, Growth prospects, Way out to intense domestic competition, Improved business vision.

Modes of Entry into International Business

• Exporting & Importing: Easiest, less investment, but additional costs and trade barriers.
• Contract Manufacturing (Outsourcing): Get goods produced locally abroad, low cost, but quality control issues.
• Licensing & Franchising: Grant rights to use technology/trademark for royalty, low risk, but risk of disclosing secrets.
• Joint Ventures: Shared ownership, local partner's knowledge, but potential conflicts.
• Wholly Owned Subsidiaries: Full control, but high investment and political risk.

Export Procedure (Major Steps)

1. Receipt of enquiry & sending proforma invoice
2. Receipt of order / indent
3. Assess importer's creditworthiness & obtain letter of credit
4. Obtain export licence (IEC, RCMC, ECGC registration)
5. Pre-shipment finance from bank
6. Production / procurement of goods
7. Pre-shipment inspection
8. Excise clearance / duty drawback formalities
9. Obtain certificate of origin
10. Reservation of shipping space, packing, forwarding
11. Insurance of goods
12. Customs clearance – shipping bill, carting order
13. Obtain mate's receipt, pay freight, get bill of lading
14. Prepare invoice, send documents to bank for negotiation
15. Securing payment – sight draft or usance draft

Import Procedure (Major Steps)

1. Trade enquiry & receipt of proforma invoice
2. Procurement of import licence / IEC number
3. Obtain foreign exchange sanction from bank
4. Placing order / indent
5. Obtaining letter of credit (if agreed)
6. Arrange for finance
7. Receipt of shipment advice from exporter
8. Retirement of import documents (acceptance/payment)
9. Arrival of goods – import general manifest
10. Customs clearance – bill of entry, pay duty, port trust dues, release order

Important Documents

• Export: Proforma invoice, indent, letter of credit, shipping bill, mate's receipt, bill of lading, airway bill, marine insurance policy, certificate of origin, packing list, bill of exchange.
• Import: Trade enquiry, proforma invoice, import order, letter of credit, shipment advice, bill of lading, bill of entry, dock challan, import general manifest.

International Institutions

• IMF (International Monetary Fund): Promotes monetary cooperation, exchange stability, short-term credit.
• World Bank (IBRD): Reconstruction & development of underdeveloped nations.
• WTO (World Trade Organisation): Reduces tariffs & trade barriers, dispute settlement.