"On one side it will quench the scientific curiosity and on the other meet a technological challenge," said K. Kasturirangan, chairman of the Indian Space Research Organisation (ISRO).
"It should be a quantum jump in terms of our capability," he told AFP, adding the mission would enhance India's status as a potential partner in future space exploration.
"If you look across the world at the pace at which space is growing, the 21st century will certainly witness a tremendous growth in terms of investments for planetary exploration," he said.
Kasturirangan said other planets such as Mars, Jupiter, Venus and Mercury would come under scientific investigation.
India's lunar mission, which is awaiting the government's nod, will launch a 400 kilogramme (880 pound) satellite into the orbit within the next five years using a locally built polar satellite launch vehicle.
"It will go around the polar orbit about 100 kilometers (62 miles) above the moon," Kasturirangan said.
The satellite will probe the physical characteristics of the lunar surface, certain aspects of physical, chemical and "geochronological aspects" of the moon, he said.
"It will further add to an overall database which properly modelled could improve our understanding of the origin of moon -- which is still not answered," he said.
Kasturirangan said India might scout global markets for small instruments for the satellite.
Critics have said cash-strapped India should not undertake a lunar mission but instead restrict its space programmes to satellite launches and use its funds for social welfare.
They have also warned that undertaking a lunar mission could halt ISRO's other programmes.
But Kasturirangan dismissed the claims and said India could afford 3.75 billion rupees (78 million dollars) for the mission.
"To continuously harp on the poverty part of it I think is not right simply because this 3.75 billion rupees will not remove poverty as India has a very large budget for poverty alleviation," he said.
"India has a very significant ability and there is no reason why we should not demonstrate this ability ... tomorrow we qualify ourselves to participate in international programmes in this area," Kasturirangan said.
The plan to undertake a lunar mission was suggested by Indian scientists and backed by aeronautical and astronautical engineers three years ago.
"Technologists, mission specialists found it (a lunar mission) a unique challenge in terms of improving the technology, control guidance and navigation, tracking in terms of mission analysis, deep space network, also building miniaturised sensors," Kasturirangan said.
Last year a National Task Force looked into the scientific merits, technological feasibility, financial viability and a reasonable time-frame for the mission and later submitted a report.
Earlier this month senior scientists and policy-makers gathered in Bangalore, the technology hub of India, to further debate the mission.
"The recommendation by and large was that India should undertake this mission," Kasturirangan said.
He said the major spin-offs from the programme would include the creation of a new cadre of planetary scientists in India during the next three years.
"It is not an individual's programme, not an organisation's programme. It is a programme defined by the community who are interested in the scientific aspects. A programme which has been examined by technologists as being feasible.
"It is a programme which is understood as timely because that is where the international programme is going. And it is a programme which is affordable to a country of this size and resource," he said.