India opted for planning after independence as it envisaged an economic system which combines the best features of socialism and capitalism. This culminated in the mixed economy model where both public and private sectors had roles to play.

A plan spells out how the resources of a nation should be put to use. India needed a systematic approach to allocate its limited resources efficiently. The Industrial Policy Resolution of 1948 and the Directive Principles of the Indian Constitution reflected this outlook. In 1950, the Planning Commission was set up to formulate plans with goals like growth, modernisation, self-reliance and equity.