Economists have come to believe that using resources efficiently can lead to differences in the
growth rates of economies. Efficient use of resources is known to improve the standard of
living of the people thereby increasing their welfare. However initially 'capital' and later
on 'labour' attracted the attention of the economists. The need for the efficient use of
resources was only recognized as an important determinant in the growth of economies in the
fifties. Economists believe that the developing countries in particular need to concentrate on
improving the efficiency of their use of resources since these economies have an increasing
number of people to feed and proportionally little resources at their disposal. Whenever there
is talk of efficiency regarding the use of resources it means that all the resources that are
used in the process of production should be used efficiently. These resources are: capital
labour raw materials power fuel and the skills of the entrepreneur. Efficiency is reflected
in the unit or average cost of production and in the quality of goods. Before the introduction
of the reforms the Indian industrial sector was characterized by numerous controls which
restricted internal as well as external competition. However after the reforms such controls
were loosened and it is now simply expected that the Indian industrial sector uses ist
resources efficiently The present study examines whether there have been significant reductions
in the components of the average variable cost in the post-reform period as compared to the
pre-reform period. Furthermore it analyses whether there has been any noticeable increase in
advertising expenditure of the firms in the post-reform period.
