which of these does not encourage industrial development?

The option that does not encourage industrial development is "Limitation of markets for industrial products". This is because a limited market will reduce demand for the products of the industry, which will ultimately lead to reduced production and growth in the sector. The other options listed, such as tax exemption, provision of financial institutions, provision of infrastructural facilities, and government direct participation, all encourage industrial development by providing support and incentives to help businesses grow and operate more efficiently.