At the time of independence in 1947, Indian economy was in a very poor and backward condition. So it was a challenge for Indian government to solve the problems of people and to provide them a better living condition.

Planning was undertaken to sustain political independence and to generate economic prosperity.

India wanted to opt socialism like Soviet Union and so it went for planning to emphasize on public sector as well as to allow active participation of private sector. The planning commission was established in 1950.