Gadgil Formula Reformation - [July 19, 1990] This Day in History

On 19 July 1990, Planning Commission decides to make changes in the Gadgil formula for central assistance to States in consultation with states. This article helps one understand the Gadgil Formula, few important points regarding special category states in India and some of the features that needs to be fulfilled to be given special status.

Aspirants would find this article very helpful while preparing for the IAS Exam.

What is the Gadgil Formula?

The Gadgil formula is named after Dhananjay Ramchandra Gadgil, a social scientist and the first critic of Indian planning. It was evolved in 1969 for determining the allocation of central assistance for state plans in India. The Deputy Chairman of Planning Commission D.R. Gadgil formulated the Third Five-year plan of the planning commission.

A Note on Special Category States in India

1. It is important to note that the concept of a special category state was first introduced in 1969 when the 5th Finance Commission sought to provide certain disadvantaged states with preferential treatment in the form of central assistance and tax breaks.
2. Initially three states Assam, Nagaland and Jammu & Kashmir were granted special status but since then eight more have been included (Arunachal Pradesh,  Himachal Pradesh,  Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand).
3. The rationale for special status is that certain states, because of inherent features, have a low resource base and cannot mobilize resources for development.

Some of the Features Required for Special Status are

(i) hilly and difficult terrain;

(ii) low population density or sizeable share of tribal population;

(iii) strategic location along borders with neighbouring countries;

(iv) economic and infrastructural backwardness; and

(v) non-viable nature of state finances

UPSC Exam Preparation Approach

1. It is important to note that for allocation among special category states, there are no explicit criteria for distribution and funds are allocated on the basis of the state’s plan size and previous plan expenditures. Allocation between non special category states is determined by the Gadgil-Mukherjee formula which gives weight to population (60%), per capita income (25%), fiscal performance (7.5%) and special problems (7.5%).

The above details would help candidates prepare for UPSC 2023.

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