The paper examines the development strategy followed by Gujarat state government during the nineties. It has followed the strategy focussed on industrialisation and urbanisation with an open door policy eversince its inception in 1960. Economic reform measures at the Centre with an explicit emphasis on trade and industry considerably benefited Gujarat making its economic performance outstanding. The state government only facilitated the growth of private enterprise since its strategy was already consistent with the changes in the policy reforms at the Centre. Since mid-nineties, however, when the reform process at the Centre slowed down, the state government in Gujarat started taking major initiative to liberalise and reform its policies further. In this process, the focus of the development strategy seems to have shifted away from the organised manufacturing to the unorganised sectors and giving protection to the SMEs. It is argued that Gujarats performance would again pick up as the national reform process gets back on the track.