Tata's Nano, built for functional frugality, is striking if not beautiful and does the job of people's car admirably

Taking the world's cheapest car out for its first public test drive by a journalist makes for a surprisingly smooth ride. Thrifty transport is not meant to be this comfortable. Tata's Nano purrs from zero to 40mph in eight seconds and its gearbox changes with ease. The brakes are solid, bringing the car to halt smartly.

True, its 623cc engine whines a little like a blender when pushed to its top speed of 65mph and the body leans like the Tower of Pisa when cornering at speed. But the wheels will give out before you can tip the car over, the Guardian was assured by Tata engineers.

Built for functional frugality, the Nano is a striking if not a beautiful car. Flashing through the dusty streets outside the Tata plant in Pune, southern India, the Nano's distinctive look turns heads. Many people, especially those who are riding motorbikes, break into smiles and thrust thumbs into the air when its jellybean shape appears.

Its perky ride is partly down to the lightweight all-steel frame that keeps the car's weight at just 600kg. Bumping up and down Pune's older potholed highways proves that the car's suspension can take on India's decrepit infrastructure.

The Nano resembles Doctor Who's Tardis. Outside it is just three metres long – smaller than hatchbacks such as the Fiat Panda and the Toyota Yaris and only a tad longer than the original Mini. Inside, the Nano is big enough for four 1.8 metre-tall (6ft) adults to sit in comfort. At 5ft 10in, I had plenty of room. What is amazing is the Nano's turning circle – its tiny wheels can spin it around in the same space as a London black cab.

The car for the common man is an ode to the ordinary. Priced at 100,000 rupees or just £1,350, the Tata Nano appears on the surface the most under-engineered car for decades. The dashboard has just a speedometer and two simple gauges for fuel and mileage. In the Nano only the essential is allowed to exist.

Tata built the car to put the developing world on wheels – leading some to smirk that the automobile would be little more than a rickshaw with windows. That is far from the reality. The Nano looks and feels like a real car, remarkable given that costs less than a high-end laptop.

On the more expensive models the air conditioning provides welcome relief from the hairdryer heat of an Indian summer. Irritatingly, to save money, the switches for the electric windows are placed at the foot of the gear stick – which means you have to reach down to bring down the glass.

Tata began with a blank piece of paper: the only taboo was that the price could not be more than 100,000 rupees. Engineers toyed with designing a car with no doors, or a vehicle made of plastic. These were rejected, however, and the Nano is made out of a single sheet of steel, aerodynamically moulded, with a rear-mounted engine.

The team behind the car say they went back to the drawing board with every component – cutting cost and minimising weight without sacrificing performance and comfort.

The car is being subtly re-engineered to meet US and European safety standards. Those new versions will see airbags added as well as updates that will meet western regulations for crash protection for people inside and outside the car.

The sparseness of the Nano is in some ways a welcome counterblast to costly add-ons found in the west, where cars are becoming almost as intelligent as their drivers. A range of increasingly sophisticated vehicles has hit the market, packed full of video screens, internet connections and adaptive cruise controls, pushing prices into the stratosphere.

The Nano is about innovation at lowest cost. The fuel efficiency is remarkable. It manages 67 miles a gallon (24km a litre) and emits only 101g of carbon dioxide for each kilometre driven. Those figures make it among the cleanest, greenest automobiles in the world. Despite this, it is hard to see how India's already congested roads will bear what could be an extra million cars a year.

True, the Nano is designed to do for India what Ford's Model T did for America almost a century ago. Here in India it is not factory workers who will be its buyers but families who want to upgrade from a 125cc motorbike to a motorcar but could not previously afford to.

Having made a dream real, Ratan Tata, the chairman of Tata group, wants to sell a European version by 2011 and an American one by 2012. And an electric version of the Nano is already in the pipeline. Few would bet against Ratan Tata. He is a man who appears to have the knack of timing. The Nano is the right car at the right time at the right place.