Gadgil formula
Topic: Federalism and Centre-State Relations · NCERT: Beyond NCERT
Meaning
The Gadgil formula was adopted in 1969 to share central plan aid among states. Plan aid was money the Union gave states for their five-year plans. The formula used four factors: population, per capita income (average income per person), tax effort (how hard a state tries to raise its own taxes) and special problems. Before this, aid was often decided case by case. The formula made the sharing more rule-based. It was revised in 1991 as the Gadgil-Mukherjee formula. It ended when the Planning Commission was replaced by NITI Aayog on 1 January 2015.
Example
Under the formula, a state with a large population and low income per person got a bigger share of plan aid. A richer, smaller state got less.
Don't confuse with
- Finance Commission devolution (Art. 280): shares Union taxes with states under the Constitution. The Gadgil formula shared plan aid through the Planning Commission.
Related concepts
- Vertical fiscal imbalance
- Grants-in-aid
- Discretionary grants
- 101st Constitutional Amendment Act 2016
- Concurrent taxing power for GST