What is it? A management theory developed by Eliyahu M. Goldratt, 59, (left) an Israel-born physicist-turned-business consultant, which says that a company's growth is retarded by one specific bottleneck in its organisational structure. The Viable Vision model of implementing this theory aims to make a company's net profits equal its sales figures in four years.

Who's using it? It was initially used by manufacturing companies in developed markets, but as growth has plateaued, it has found many more takers in developing regions like India.

Why is it useful? Some of India's fastest growing industries like IT may be hitting some constraints in terms of cost and labour arbitrage and this model may offer companies a radically different business model.

Who is offering it? Satyam Computer Services has the largest number of consultants trained in the execution of TOC. "We have 25 consultants skilled in Goldratt offerings, and we aim to ramp up to 50 or 60 soon," says Mohan Srinivasan, VP (Business Consulting Practice), Satyam.

-Rahul Sachitanand

How RBI Controls Money Supply

What are the main instruments?

The Repo Rate: This is the rate at which RBI releases funds into the system. It was at 6 per cent in 2004 but is now at 7.75 per cent.

Reverse Repo Rate: This is the rate at which RBI sucks out excess liquidity from the system. The reverse repo rate is currently at 6 per cent.

Bank Rate: This is the rate at which RBI lends money to banks. It is currently at 6 per cent.

CRR: This represents the percentage of deposits that every bank has to keep with the RBI. The RBI pays interest on CRR balances and increases or decreases the CRR when it wants to drain or ease liquidity in the economy. The CRR is now at 6.5 per cent.

SLR: Statutory Liquidity Ratio is the percentage of deposits that banks have to deploy in government securities and works in the same way as CRR. It is now at 25 per cent and has not been changed for a decade.

-Anand Adhikari

ECONOMY WATCH

CONSUMER PRICE INDEX

Status: 7.3 per cent.

Impact: The rising consumer price index is clearly the result of the gradual rise in food prices. This will soon start impacting household budgets and may result in cutbacks in expenditure on other items. If left unchecked, it can impact the consumer boom that's currently driving demand in the economy.

INTEREST ON CAR LOANS

Status: 13.5 per cent.

Impact: The rising interest rates will impact car sales in India, and affect both domestic and foreign automobile companies that have created large capacities in anticipation of growing passenger car demand in the country.

-Compiled by Anand Adhikari

P-WATCH
A bird's eye view of what's hot and what's not on the government's policy radar.

ARE PHARMA CLOTS DISSOLVING?

Multinational pharmas: Secure in India

The government finally appears to be smoking the peace pipe. Multinational pharma majors like Merck and Novartis can hope to secure sales of their patented drugs (which, for most part, end up in complicated life saving procedures) in the country; a government panel is working on a regime where the prices of such drugs will be negotiated.

The benchmark: it will match the lowest price anywhere else in the world. The committee will meet in the next fortnight to finalise the terms of the deal.

All the clogs in the peace pipe are far from dissolved: the main pharma market revolves around the generic business, for which the government has appointed an Empowered Group of Ministers that is slated to meet later this month. The problem: Union Minister of Chemicals & Fertilisers Ram Vilas Paswan wants more price regulation. Currently, the 74 drugs under price control account for 30 per cent of the industry's revenues.

Hopefully, resolution on this count will pave the way for a pharma policy, although there are other issues like taxation that need to be addressed, since the consumer price is close to twice the production cost. With the government having promised a policy in 2002, any further delay will only add to its embarassment.

-Aman Malik

GOVT REASSERTS CONTROL IN OIL

While exploration of oil and gas has become an attractive business in recent years, spurred by the hardening of global crude oil prices as well as the improved prospects of finding hydrocarbons in the country, regulation has not kept pace. The result: the government has taken back the powers it had delegated to its technical arm, the Directorate General Hydrocarbons (DGH), to discharge a significant part of its contractual obligations vis-à-vis the contractor (exploration company). Reason: a liberal policy adopted by the DGH in approving costs of contractors. So, companies like Reliance and BG will have to visit the bureaucrats more often than in the past, when interaction was largely with the DGH (for getting their costs approved, since recovery of such costs is allowed contractually).

Surely, the government is to blame for another reason: last year, it consciously decided against setting up a regulator for the exploration business.

-Balaji Chandramouli

DIRECT DEALING FOR LAND

Faced with criticism over the low compensation to farmers for land acquired for SEZs and other industrial projects, the government is planning a legislation that will ensure direct dealing between the farmer and land acquirers.

The move will eliminate those interested in boarding the SEZ bandwagon to make a quick buck on land arbitrage-buying land at below-market rates determined by the state government (and paid to the farmer) and selling the developed land at market prices or unlocking its true value in the financial market place by mortgaging it to secure a loan.

With companies acquiring land themselves, the cost of land acquisition will certainly shoot up, but the process will probably be seen to be far more just and equitable than the prevailing situation, which has sparked off protests across the country. Evidently, Prime Minister's often repeated refrain of ensuring inclusive growth is finally taking shape. And, Indian industry is not complaining.

-Shalini S. Dagar