The recent domestic slump, partly caused by overcapacity in many industrial sectors, falling international commodity prices, and greater competition from Asia in third markets, has particularly hurt cement, steel, vehicles, and capital goods. The only heavy industry thus far unscathed appears to be aluminum. The slump is forcing many industries to restructure. Up until liberalization in 1991, businesses had grown by diversifying, resulting in the creation of sprawling family-owned conglomerates, such as those of the Tatas and the Birlas. With rising competitive pressure, these businesses are, however, in the process of restructuring their operations, with an emphasis on strengthening their core competencies and divesting the less profitable lines of operation.
Indian industry is in fact witnessing unprecedented consolidations, takeovers, and mergers.
While the heavy capital goods industries are in difficulty, software, pharmaceuticals, and consumer goods industries have been flourishing. The industry in India has been built on projects outsourced by international businesses to its low-cost, highly skilled labor. Y2K and the introduction of the euro, problems which Indian software is aimed at addressing, have contributed to a booming industry. Growth prospects appear sound. Phase-in of the euro currency and rising domestic demand will continue to provide revenues.