This paper analyses the causes for failure of national development eff
orts. Incorrect choice of development approach has resulted in widenin
g the gap between the rich and the poor. Based on the writings from ps
ychology and sociology, a construct of ''Social Identity'' has been de
fined. Development efforts should make people aware of their social id
entity as it exists in their mind and the historical forces which are
responsible for that identity and its dysfunctional effects. The paper
recommends that change-agents for development should facilitate the p
oor and oppressed, to be empowered for managing a change in their soci
al identity. It also highlights how voluntary organisations are better
positioned as compared to the government agencies in facilitating the
poor in their developmental efforts.