At the time of independence, the big question facing policy makers was regarding the role of the government and the private sector in industrial development. The public sector was given a leading role for several important reasons.

First, Indian industrialists did not have the capital to undertake investment in industrial ventures required for the development of the Indian economy. The financial resources needed for major industrial projects were simply not available with private industrialists.

Second, even if industrialists had the capital, the market was not big enough to encourage them to undertake major projects. The limited size of the domestic market did not provide sufficient incentive for private investment in large-scale industries.

Third, the decision to develop the Indian economy on socialist lines led to the policy of the government controlling the commanding heights of the economy, as stated in the Second Five Year Plan. This meant that the government would have complete control of those industries that were vital for the economy.

Finally, the policies of the private sector were designed to be complimentary to those of the public sector, with the public sector leading the way in industrial development. This framework ensured that essential industries developed in a planned and coordinated manner.