Sustained industrial growth has been widely acknowledged as an engine of economic transformation. Less developed countries, however, remained predominantly agrarian due to lack of dynamism in the industrial economy and the low level of industrialization. Economic policy reform programme was initiated since July 1991 to generate essential dynamism in the industrial sector for successful transformation of the agrarian economy of India. In this paper an attempt is made to examine the industrial growth experience of Punjab economy during the period 1980-81 to 2001-2002, that is a decade before and a decade after the initiation of economic reforms. The empirical evidence clearly show a downturn in industrial growth in the post-reform period compared to that of the pre-reform period. Factors that have contributed to the deceleration of industrial growth in Punjab were lower investment-GSDP ratio, lower plan expenditure and lower quality of human capital and infrastructure. Identified factors that have led to the deceleration of industrial growth in Punjab were making the state scarce in economic activities and lack of private corporate investment in Punjab both of domestic and foreign. Alternative strategy has been suggested which not only has the capacity to arrest the process of deceleration of industrial growth in the state but also has a capacity to transform agrarian economy to industrialized one along with raising the level of rural income and welfare.