A comparison of the two main instruments of resource transfer from the Centre to the States: the constitutional Finance Commission and the erstwhile executive Planning Commission (now NITI Aayog).
- The Finance Commission is a constitutional body under Article 280, set up every five years, recommending statutory transfers (devolution of the divisible pool of taxes and grants-in-aid).
- The Planning Commission was a non-constitutional, non-statutory body created by a Cabinet resolution in 1950; it allocated discretionary plan grants and approved State plans.
- The Gadgil formula (and later Gadgil-Mukherjee formula) was used by the Planning Commission for distributing central plan assistance among the States.
- The Planning Commission was abolished and replaced by NITI Aayog on 1 January 2015, which has no fund-allocation role.
- After 2015, with no Planning Commission, the Finance Commission has become the principal channel of Centre-to-State transfers.
The constitutional-versus-executive contrast, the five-year cycle, the Gadgil formula and the 2015 abolition are recurring fiscal-federalism distinctions.
The Finance Commission (constitutional, statutory transfers) is not the Planning Commission (executive, discretionary plan grants); the latter is gone, replaced by NITI Aayog which does not allocate funds.
Finance Commission: constitutional, Art 280, statutory transfers; Planning Commission: executive (1950 to 2015), discretionary grants, now NITI Aayog.