In the recent past, the focus of economic policy in India has shifted to issues of equitable growth. This implies that the economy should not only maintain the tempo of growth but also spread the benefits of growth to all sections of the population and geographical regions of the country. This change in approach is particularly important for the hilly regions of the country, as they constantly struggle with underdevelopment, even when the rest of the economy is doing well. This paper analyses the problems of a relatively new state in the hills, Uttarakhand, and particularly the reasons for stagnation in the hilly regions of the state. It also examines the policy priorities that can enable the state to achieve inclusive growth.