IntroductionWe observe, most often, large differences between the incomes of different regions of the same country. The same is observed even between cities within a state, districts within a city, areas within a district, etc. Although the reasons for these differences are most obvious at the national and subnational levels, they become more complex as we get to smaller and smaller areas. This has attracted the attention of many people in the past and generated enormous amounts of literature. Most theories have appealed to “economic geography” and its diversity to explain these income differences. We will try to examine some of these explanations in the context of regional development. Any attempt to explain regional differences takes us back to the early 1900s, when subnational and regional issues began to take on greater importance. Historically, the state has played a key role in shaping the geography of developing regions of the world. The late 1900s saw a paradigm shift as the state moved to play a less interventionist role, with more freedom ceded to free market forces in the economy. Chakravorty (2000) uses this paradigm shift to explain the theory of regional development before and after the reform. 1) Cumulative causality by Myrdal (1957) and Kaldor (1960) The concept of cumulative causality simply means everything that happens in the past, continues into the future. In other words, a few historical events provide the impetus for a certain phenomenon to continue into the future. For example, the establishment of a new factory in the region will attract more investment and more jobs to that factory and to the ancillary and service industries in...... middle of article... ... Economic Geography and Urban Studies, Temple University, Philadelphia, USADatt, Gaurav and Ravallion, Martin (2002), “Is India's Economic Growth Leaving the Poor Behind? », The Journal of Economic Perspectives, Vl. 16, n° 3 (summer 2002), pp. 89-108 Krugman. Paul (1991), “Increasing returns and economic geography”, The Journal of Political Economy, Vol. 99, no. 3. (June 1991), pp. 483-499. Krugman, Paul (1994), “Complex Landscapes in Economic Geography”, The American Economic Review, Vol. 84, No. 2, Papers and Proceedings of the One Hundred and Sixth Annual Meeting of the American Economic Association (May 1994), pp. 412-416 Srinivas MN (1966), “Social Change in Modern India”, Economic and Political Weekly, Vol 1, No 3 (September 3, 1966), pp. 412-416. 119-120Taylor, Cook et al. (2003), “Financial services consolidation and its importance for London”, Corporation of London