Gadgil method to allocate funds to states still relevant: Govt

The Gadgil-Mukherjee formula for fund allocations to states by the Centre has not outlived its relevance with changing socio-economic scenario, Parliament was informed today.
Besides, it was also clarified in a written reply to Rajya Sabha that the Raghuram Rajan Committee report has not recommended to replace all existing methods for allocation of fund by Centre to states.
"No Sir," replied Planning Minister Rajeev Shukla, to the question on whether government feels that the time tested Gadgil-Mukherjee formula for fund allocation has outlived its relevance to the emerging socio-economic scenario.
Elaborating further the minister said, "...Raghuram Rajan Committee has recommended that some of the development funds may be allocated by the Centre through methodology adopted by it and has also recommended that the approach recommended by in the Committee's report is not intended to replace all existing methodologies."

He further explained that there various arrangements through which central funds flow to state governments and Gadgil Mukherjee formula governs a part of such transfers.
Last year, the Rajan panel's report had brought out a Multi Dimensional Index (MDI) for allocation funds to states based on the indicators including per capita consumption, education, health, household amenities, poverty rate and connectivity.

The Committee, which suggested a new formula for providing assistance to the states on the basis of MDI, evoked divergent reactions from the states.
While Bihar Chief Minister Nitish Kumar welcomed the recommendations of the Rajan Committee, Tamil Nadu Chief Minister Jayalalithaa rejected the report saying it was skewed'.

According to Jayalalithaa, the report was a "thinly disguised attempt to provide an intellectual justification to deliver resources to a potential political ally".
The Rajan panel was set up last year, amid demand from various states for a special category status for grant of additional assistance from the central pool.