India's business environment has changed drastically in the last few years. As a result the rules of the games have changed. From competing only on prices, the companies have to no improve their efficiency to increase productivity, cut costs and improve products.

A study of the cost of production done by done by ICICI shows that the cost of production as proportion of value of production or final sale price has not really come down. The study done by Mathew Joseph, Rupa Nitsure, L. Bhagirathi and Madan Sabnavis has calculated costs under five different heads. The total cost per unit of production rose initially up to 1993-94 and then fell in 1994-95 and 1995-96 mainly due to lower power and wage costs. It went up again the next year because of increase in power and wage costs. While reductions did take place, the overall impact was not much.