Fact that economy is being over regulated and controlled was realized in 1980’s. As a result government pursued policy of deregulation and liberalization, rather in tardy and non-coherent manner. During the period from 1980-90 the economy began to pick up and the rate of growth (GDP) increased to 5.8 per cent. However, it was driven mainly by a massive expansion in the country’s fiscal deficit (FD increased demand in economy). Also, as we noted imports liberalization in 1980 industrial policy resolution, this led to high industrial growth based on imported raw materials. Consequently India’s FOREX reserves depleted and neither there were enough exports to finance the imports. This all led to 1991 balance of payment crisis, which among other things forced government to adopt New Industrial Policy, features of which are discussed at end of last article.