Gaur, Achal Kumar creator text xu| 2000 continuing ng p.477-90 Public sector policies must deal with the issue of distribution of income and wealth since this task is not done perfectly by the functioning of the market mechanism. The present paper attempts to estimate the redistributive role of central plan grants for state plans (1970-71 to 1989-90) for which, wealth neutrality model has been employed. Findings of the study reveal that about 85 percent of per capita central plan grants for state plans had no income neutralizing effect and thus had aggravated the prevailing inter-state economic disparities. - Reproduced Federal state fiscal relations Indian Journal of Economics 180718