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The establishment of the city of Chandigarh was the result of the crises and chaos in northwestern India in the aftermath of its independence from British colonial rule.[24][25] During the partition of India in 1947, the province of Punjab was divided into two: the majority Hindu and Sikh eastern portion that remained in India and the majority Muslim western portion that became part of Pakistan. Lahore, the provincial capital of undivided Punjab, though fiercely contested during partition, was eventually ceded to Pakistan.[26] The provincial government of independent India’s East Punjab state was left without an administrative center or capital.[24]

The loss of Lahore, the need for the rehabilitation of refugees from West Pakistan and a mounting exodus of business communities from the state created a sense of urgency.[27][28] Shimla, the former summer capital of both British India and the Punjab province, partially housed the government of East Punjab state. Shimla’s inability to fully contain the administrative machinery resulted in government offices to be scattered at several places across the state,[c] imposing difficulties and costs on the public as well as the government.[29]

Conception and initial planning

It was decided by representatives of the government of India and of the state of East Punjab to build a new capital for the state,[30] because attaching capital functions to an existing city—all of which were considered inadequate and had swollen in size due to migration of refugees from West Pakistan—was considered as costly as building a new city.[30][31]

The new capital needed to have enough space for government machinery, for resettlement of refugees and their businesses, for expansion, and adequate rail, road and air connectivity; it also had to assuage the psychological loss of partition, its construction supposed to stimulate the state's devastated economy, as well as being a 'symbolic gesture' of unity, stability, and an assertion of India’s newfound sovereignty. India’s erstwhile Prime Minister Jawaharlal Nehru personally endorsed the project, remarking

Let this be a new town, symbolic of the freedom of India, unfettered by the traditions of the past … an expression of the nations faith in the future."

The capital was to be located in the most populous part of the state, between the Doaba and Ambala districts, and projected to hold about 500,000 people. Several existing cities and towns across the state were considered for the possible development of the new capital, but all rejected for different reasons. Political lobbying also made the selection of an existing city as the new capital difficult. The absence of political consensus on the location of the new capital and the large costs involved threatened the project.

In 1948, three possible sites were settled upon, one lying in the Ambala district, one in Ludhiana, and one, the most preferred of the three, being partially in Ambala and Patiala state which was then not part of the East Punjab state. The first site, in Ambala district’s Kharar tehsil, was ultimately selected to be the location of the new capital after aerial reconnaissance by Parmeshwari Lal Varma and Prem Nath Thapar. The name of the new city derived from a temple dedicated to Hindu goddess Chandi present in one of these villages. The location was praised by the later team of the city's architects for being beautiful and practical.

Agricultural lands, including large mango groves, of fifty-eight villages with a population of 21,000 people were to be affected by the construction of the city, involving the displacement of many of them. The affected villagers, encouraged and supported by political parties such as the Socialist Party and Akali Dal, began agitating against the project. Political opposition to the project also stemmed from a desire for relocation of the new capital to sites favourable to the opponents. The government reached an agreement with the affected villagers in October 1950, and established a local committee to advise on rehabilitation of displaced people, thus ending the agitation.