Local development, by whomever it is initiated - the State, private investors or small businesses, secular or religious authorities and institutions, is dependent on available resources and people participation. If the new possibilities meet the needs and expectations of the population, the local development is successful; on the contrary, if the viewed perspectives mismatch the imaginary picture, the scenario can be reversed: despite the enthusiasm about the development, the society will resist changes. The declared objectives will come into conflict with the perception of the expected results and their usefulness. The paper is aimed to analyze this dilemma by the example of Dagestan. The author points to the discrepancy between the rational logic of economic management and people behavior influenced by the local culture. Presuming that culture impacts on the local development together with investments, resources and institutions, the author, employing interviews and group discussions, outlines the symbiosis of tradition and modernity in Dagestan society. The analysis leads to a conclusion that the role of traditions in modernization processes is underestimated in Dagestan, and the general tools of regional socioeconomic development are insufficient in the situation when a secular system of values competes with religious one. At the end, an attempt to identify the ways to address this problem is made.