of households ( mish ) by the national council of applied economic research ( ncaer ) amply demonstrate how new markets have been developed in the country, right since late 1980s. third, the use of new sources of supply of raw materials also involves innovation. with trade liberalization, industry now has access to all raw materials and goods available in the world, so a great deal of innovation has been taking place in their procurement and use. a fourth possibility is innovation in new forms of industrial organization. with overall change taking place in the economic environment, we are also witnessing new forms of industrial organization on a regular basis. thus, from all these four points of view, the pace of innovation has been very healthy in india since the early 1990s. the national knowledge commission ( 2007 ) in its recent report titled " innovation in india " has defined innovation in a similar fashion : " as a process by which varying degrees of measurable value enhancement is planned and achieved, in any commercial activity. this process may be breakthrough or incremental, and it may occur systematically in a company or sporadically ; it may be achieved by : - introducing new or improved goods or services and / or - implementing new or improved operational processes and / or - implementing new or improved organizational / managerial processes in order to improve market share, competitiveness and quality, while reducing costs. " besides schumpeter, there are others who have talked about different types of innovation such as business model innovation, marketing innovation, improvement in product design and in product pricing. here again, we can observe a bucket - full of innovation in the country. in terms of organizational innovation, indian business organizations have ventured into all kinds of new kinds of business models – be it the introduction of flat organizations, lean organizations, or pyramidal organizations – and things keep on changing according to the changing business environment. new business practices are also being introduced : for example, the practice of 360 degree evaluation within companies is a new concept and perhaps alien to a hierarchical society. another type of innovation is process innovation. the indian pharmaceutical industry is known for its great degree of process innovation in drugs. yet another area is product and service innovation in terms of new goods and services for which indian examples can be many. as regards supply chain innovation, the best example comes from the rural sector particularly the agriculture sector, but which is still in its infancy in india. all these innovations take place when there is some need. the old saying that “ necessity is the mother of

the capital market. the decontrol and expansion of capital markets should have made the access to market intermediated financial resources easier for well established, credit rated large incumbents. reforms in the banking system have been aimed to bring in greater efficiency by introducing new competition through the new private sector banks and increased operational autonomy to public sector banks. in the government securities market, the reform measures have been aimed at better price discovery of interest rates by auctioning government securities, and developing the infrastructure for efficient trading. in the forex market likewise, there has been a gradual movement towards a market - based exchange rate regime coupled with the introduction of newer products and players. side - by side, conscious steps have been undertaken towards building up of the institutional architecture in terms of markets, technological and legal infrastructure. consequent upon the wide array of such measures, the cost of funds for the corporate sector has become market - related. coupled with greater access to foreign investment alongside improvements through trade liberalization, there is a significant growth in manufacturing exports as also the import intensity of exports. the corporate sector has thus become increasingly exposed to international product and factor prices. such market - driven pricing of products and factors combined with gradual reduction in rates of interest in an overall benign interest rate environment and moderate debt equity ratios have resulted in lower interest outgo. this, in turn, has promoted better resource allocation and efficient use of new technology, which has become reflected in their profit and efficiency parameters. what has been the result in terms of corporate performance? all the important parameters : sales, gross profit, profit after tax, all have recorded robust growth rates since 2002 - 03, implying that economic activity in the corporate sector has improved tremendously over this period ( table 5 ). the dependence on banks for financing has indeed gone down. there has been a very significant reduction of interest expenses in total expenditure. to that extent, the corporate sector could have become more insensitive to small movements in interest rates. table 5 : corporate financial performance item 1990 / 91 1991 / 92 to 1996 / 97 1997 / 98 to 2002 / 03 2003 / 04 to 2006 / 07 2006 - 07 ( apr - sept ) 2007 - 08 ( aprsept ) growth rates ( per cent ) sales expenditure depreciation provision gross profits interest payments profits after tax ( pat ) 15. 8 15. 1 16. 9 16. 6 7. 0 7. 4 20. 7 19. 7 27. 4 25. 6 17. 4 16. 9