The car was intended to be an entry-level car for Indians who rode two-wheeled vehicles. But all the publicity regarding the low price drove away potential buyers who didn't want to be seen in a "cheap" car. Another problem with the Nano has to do with its lack of features that are standard even in entry-level cars from non-Indian firms. Plus there were a number of safety-related concerns mentioned in the link.
One fact I couldn't locate on a not-too-diligent Google search was the name of the styling team or lead stylist of the Nano. That's too bad, because the car is cute and contemporary looking despite the severe aesthetic constraints imposed by the extremely small package. Ordinarily, I would complain about the small wheels because most cars look best if their height is about two or two and a half times the diameter of their tires. But those packaging constraints make that relationship impossible for a Nano.