INDIA

A Background Note on Gadgil Formula for Distribution of Central Assistance for State Plans: Planning Commission (1997/02/24)

Prior to Fourth Five Year Plan, the allocation of Central Assistance to the State Plans was based on a schematic pattern and there was no definite formula for allocation In view of the general demand for an objective and transparent formula for allocation of Central assistance for State plans, a formula known as Gadgil formula was evolved in 1969 which was adopted for distribution of plan assistance during the Fourth and Firth Five Year plans. This formula was modified in 1980 and the modified formula became the basis for allocation during the Sixth and Seventh Five Year Plans. The modified formula was again revised in 1990 and formed the basis for allocation of Central Assistance for 1991-92 only. Following representations, the formula was further revised in 1991. The Gadgil Formula (1991), has been in operation during the Eighth Plan period. Only the details of 1991 formula are discussed below, as others are only of historical value. However for comparision purposes all the 4 formulae with criterion and weight in respect of distribution among Non-Special Category States are given at the Annexure.

advtanmoy 06/09/2023 2 minutes read

MADHU DANDAVATE DEPUTY CHAIRMAN
PLANNING COMMISSION
NEW DELHI – 110001
INDIA
D.O.NO.4/9/96-FR/DCH/3670

February 24, 1997.

My dear Badal Ji,

You are aware that the normal Central Assistance for State Plans has been allocated among the States on the basis of revised Gadgil Formula approved by the National Development Council in 1991. This revised formula has been adopted for the distribution of normal Central Assistance in 1997-98 also.

During my discussions with the Chief Ministers for the finalization of the Annual Plan 1997-98, some of the Chief Ministers have pointed out that the formula adopted in the Eighth Plan should be further revised. One view was that States which do relatively better in fiscal management and resource mobilization should be suitably rewarded. An alternate view was that since developed States are able to attract more private investment, backward States should be given more consideration in Central assistance by giving higher Weightage to backwardness.

A revision in the formula requires the approval of the National Development Council. In order to enable the Planning Commission to take a holistic view on the matter, I would like to have your observations, especially, on the following two points, namely whether you would like to have the formula in operation currently further revised and if so, what are the areas of revision you would like to consider. I hope that you will be able to send your considered views on these in a couple of weeks. Based on your views and those of other Chief Ministers, we propose to prepare a note which can be circulated among all Chief Ministers for consideration. If there is a sufficient measure of agreement on the approach to be adopted, we can consider the matter further in a subsequent meeting of the NDC.

I am enclosing a background note on the Gadgil formula for ready reference.
With regards,

Yours sincerely,
SD/-
(MADHU DANDAVATE)
Shri Prakash Singh Badal
Chief Minister
Government of Punjab,
Chandigarh.

Read the whole document:

A-Background-Note-on-Gadgil-Formula-for-Distribution-of-Central-Assistance-for-State-Plans-Planning-Commission