The model was created as an analytical framework for India's Second Five-Year Plan in 1955 by appointment of Prime Minister Jawaharlal Nehru, as India felt there was a need to introduce a formal-plan model after the First Five Year Plan (1951–1956). The First Five-Year Plan stressed investment for capital accumulation in the spirit of the one-sector Harrod–Domar model. It argued that production required capital and that capital can be accumulated through investment: the faster one accumulates capital through investment, the higher the growth rate will be.
This framework was created by Prime Minister Jawaharlal Nehru in 1955 to serve as a planning model for India's Second Five-Year Plan. Following India's realization that it needed to introduce a structured-plan framework after the First Five Year Plan (1951–1956), the initial Five-Year Plan focused on investment for capital accumulation, drawing from the one-sector Harrod-Domar model, which asserted that production necessitates capital and that capital can be built up through investment: the faster one accumulates capital via investment, the higher the growth rate will be.