Many developing economies use tax holidays to attract investment in industrially backward areas by providing a limited period tax exemptions, deferments and reductions for qualified investors. Moving on the same tack, Government of India preferred the same as an important fiscal measure for balanced regional development. The study on which this publication is based provides an essential introduction to the effects of Special Industrial Incentive Packages and Tax Holidays. The study tries to evaluate the growth impact on industries of Himachal Pradesh as of Special Industrial Incentives Package which was granted to the state by Government of India on 7 January 2003. The study brings forth the fact that government incentives and concessions are directly related to the level of industrialisation. Evidence of the study is relevant to policymakers designing tax incentives for industrially backward states and also to the governments of such states for the purpose of availing incentive packages from centre government.