Prior to the Fourth Plan, the allocation of Central assistance was based on schematic pattern and there was no formula for allocation.

In view of the general demand for an objective basis for allocation of Central assistance for State Plans, a formula known as Gadgil Formula was evolved, which in its original form was adopted for distribution of Central Plan assistance during Fourth and Fifth Plans. According to this formula, allocation for States (other than special category States) was based on population (60 per cent), per capita income (10 per cent), tax effort (10 per cent), on-going irrigation and power projects (10 per cent), special problems (10 per cent).

Since the criteria in respect of on going programmes were weighted in favour of rich States, Gadgil formula was modified in the beginning of the Sixth Plan, and the weightage for on-going schemes was added with per capita income, making its weight 20 per cent. This modified formula became the basis of allocation of Central Plan assistance to States in Sixth and Seventh Plans and Annual Plan 1990-91.

Modified Gadgil Formula

Keeping in view suggestions made by some of the States for revising the modified Gadgil formula, various alternatives were considered by the NDC in October, 1990 and the formula was revised and it laid down criteria with weightage of population (55 per cent) per capita income (20 per cent - deviation method; 5 per cent distance method), fiscal management (5 per cent), special development problems (15 per cent). This formula was followed for distribution of Central assistance for 1991-92 only.

Most of the State Governments expressed reservation on this formula and keeping in view their concerns, a Committee under the chairmanship of Mr Pranab Mukherjee, Deputy Chairman, Planning Commission was constituted to evolve a suitable formula for distribution of Central assistance.

The suggestions made by the Pranab Mukherjee Committee were discussed by the NDC on 2324, December, 1991 wherein a consensus emerged and a revised formula evolved which was equitable and acceptable and was made the basis of allocation of Central Plan assistance to the States for the Eighth Plan.

The principle of distribution of Central Assistance among the States, popularly known as Gadgil formula after the name of Dr D R Gadgil, the then Deputy Chairman of the Planning Commission, came to used from the Fourth Five Year Plan. The formula was updated in September 1976 by NDC.

It was further modified on August 31, 1980 by NDC. A modified formula, which came to be known as "Gadgil-Mukherjee formula", was adopted by NDC in its meeting on December 23 and 24, 1992. Since then the Normal Central Assistance (NCA) is being distributed on the basis of this formula.

It does not apply to the distribution of Additional Central Assistance (ACA) under "Others" and "EAP". The Gadgil-Mukherjee formula takes into account a number of criteria for distribution of central plan assistance including population, per capita income, performance and special problems. The weights assigned to different criteria under the formula are as follows:

(i)Population 60 per cent

(ii) Per capita income 25 per cent

(a) Distance method 05 per cent

(b) Deviation method 20 per cent

(iii) Performance 7.5 per cent

(Tax effort, fiscal management, national priorities including population control, literacy,

completion of EAP’s and Land Reforms)

(iv) Special problems 7.5 per cent

For Special Category states considerations are different. They get funds on 90 per cent grants 10 per cent loans basis besides industrial concessions of varied nature. It is learnt that packages for the 11 Special Category States are not uniform.

Case of State of Goa for Special Category

The State of Goa has achieved a high Human Development Index and has been consistently performing well in financial parameters as well. However, the recent global recession has adversely affected the revenue collection of the State. To revive the situation, the State requires fiscal stimulus in the form of higher investment for creation of infrastructure in key sectors of the economy such as Agriculture, Health, Education, and Social Sector. Since the sources of funding from the private sector have dried up due to poor liquidity, the State requests the Planning Commission to help the State to meet the gap.

Time and again, the State of Goa had been ardently persuading the Central Government for granting ‘Special Category Status’ to Goa and provide enhanced financial assistance to tide over the peculiar problems faced by the State. The Government of Goa hopes that the Central Government will appreciate the difficulties encountered  by the State and will provide the much needed financial assistance henceforth in achieving the State’s avowed objective of becoming a modern developed State akin to the developed Nations of the world. 

Goa calls for the attention of the Union Government on the following areas for better appreciation of the problems:

a) The State missed out on the first two (2) Five Year Plans because its accession to the Portuguese Regime at that time. The process of Planning in the State began only after the State got liberated from the Portuguese regime in 1961; 

b) The Population of the State is too small as compared to many other States to have the favourable terms of sharing in the Gadgil-Mukharjee formula for distribution of Central Assistance amongst the States;  

c) Even though the State missed the early Planning process, the socio-economic variables of the State are much above the National average viz., The Per Capita Income is well over Rs 80,000  which is much above the National average, the Literacy Rate is over 85 per cent, the Birth Rate and Death Rate are 14.3 and 7.1 per cent respectively, the infant Mortality Rate(IMR) is at miniscule low of 13.1 per thousand live births. All these are incomparable to the rest of the States and are comparable to many developed countries of the world. The spending on the Education, Health and Social sector is 45 per cent of the Plan Size. All these could be achieved mostly on the States on initiative, however, in the present difficult times, the State looks up to the Centre for the much required Central Assistance to maintain the pace of development;

d) The average tourist arrival to the State is around 30 lakhs including over 3 lakh international tourist. Needless to say, this exerts heavy pressure on the limited resources of the State in terms of providing them with the basic amenities viz, potable water, sewerage and sanitation facilities, road and transport, electricity, health care facilities so on and so forth; 

e) The State has been contributing immensely to the National Exchequer on account of Central Excise, Customs Duty, Income tax, forex earnings on Iron-ore export and forex earnings from international tourist. The total contributions have been in the range of Rs 10,000 crore  whereas the total transfers from the central Government to the State is less than Rs 445 Crore. An enhanced share of around 10 per cent of the contribution made to the centre would be more ideal in fulfilling the aspirations of the people of the State;   

f) The State supports the migrant population of almost 35-40 per cent of its own population which adds to the pressure on the scare resources of the State;  

g) The accumulated debt of the State is over Rs 5000 crore, debt servicing per se takes away a substantial part of the scarce resources of the State and is left with a paltry sum for the developmental activities. This indeed too is an area of concern where the State requires the Central Assistance; 

h) The State has put in place the Fiscal Responsibility and Budget Management (FRBM) Act, 2006 to ensure fiscal discipline in managing its finances and has largely been successful in eliminating the Revenue Deficit which was as high as Rs 228.50 crore in 2001-02 and, turned it around to Revenue Surplus from 2007-08 onwards. The Fiscal deficit, however, remains an area of concern in the given recessionary economic condition across the globe and the State economy is no exception to it; 

i) Even while some of the macro-economic indicators of the State are much above the National average and comparable to many of the developed Nations of the world, there exists unemployment, underemployment and poverty. The Government of Goa would like to tide over this paradoxical situation for which State deserves special financial assistance from the Centre in general and grant of Special Category status to the State in particular; 

j) The State is constrained by availability of land for agricultural and horticultural uses as 37 per cent of its land is notified for forest. Further, the unavailability of agricultural labourers and high cost of labour makes the agriculture unattractive and unproductive. Adoption of modernised and mechanised agriculture is the only option available before the State but for paucity of funds. Therefore, the State of Goa requires the support of the Central Government in this regard; 

k) The State of Goa has been a preferred destination for various National and International events of repute such as International Film Festival of India, South Asian Film Festival and so on; besides Conventions/Conferences of the trade/professional bodies of National and International level being held at Goa on regular basis throughout the year. All these require modern infrastructure to be in place for catering to their demands. In view of the above reasons Goa has repeatedly represented to the Central Government for according it a ‘Special Status’ so as to enable it to get appropriate Central Grant for keeping its developmental process on an even keel.

The needs and requirements of each State should be examined separately without adopting a straight jacket formula.

Special Category status needs to be examined on case to case basis and State of Goa should be seriously considered for the inclusion in the category from that angle.