Intent and Criteria of Special Category Status
- It was introduced in 1969 based on the recommendations of the Fifth Finance Commission.
- The intent was to help disadvantaged states regarding their geographic, social or economic status to improve their position on par with more developed Indian States.
- Criteria of having a hilly terrain and a sizable tribal population can entitle a State to be granted the special category status.
- Bihar Chief Minister has reiterated the State’s long-standing demand to be granted the special category status by the Centre. Notably, the Bihar Cabinet had passed a resolution late last year demanding special category status for the State.
- Benefits of Special Category status:
- A State would be able to claim more funds from the Centre than otherwise and can also enjoy various tax-related concessions.
- For example, a State with special category status would receive 90% of funds from the Centre when it comes to schemes sponsored by the Union government, as against other States which receive only around 60% to 80% of funds from the Centre.
- Initially, Jammu & Kashmir, Assam and Nagaland were granted the special category status to aid their economic development. Subsequently, eight other States including Himachal Pradesh and Uttarakhand were granted the special status.
- Thus, 11 out of 28 States, or more than a third of Indian States, already enjoy the special category status.
- Why is Bihar demanding the special category status?
- Bihar’s economic backwardness, Bihar’s per capita income of around ₹60,000 is among the lowest in the country and the State lags behind the national average in several human development indicators as well.
- Bihar has also noted that the State’s fiscal situation has been adversely affected by the bifurcation of the State that caused industries to move to Jharkhand, lack of sufficient water resources for irrigation, and frequent natural disasters.
- The most recent Bihar caste-based survey of 2022 indicates that nearly a third of the State’s people live under the poverty line.
- However, reluctance from the centre is due to financial stress.
- Greater devolution of taxes to the States from 32% of the total divisible pool to 42% based on the recommendation of the Fourteenth Finance Commission makes the demand for special category status redundant.
- The Centre may also fear that granting the special category status to certain States will encourage others to demand the same from the Centre.
- States with better political bargaining power with the Centre may manage to receive more funds either through a special status or by other means.
- Competitive populism of promising special category status to gain or stay in power can lead to a worsening of the Centre’s finances.
- In 2022-23, for instance, Bihar’s gross domestic product grew at 10.6% as against the national average of 7.2% while its per capita income level in real terms grew by 9.4% in the previous year.
Dig Deeper: Read the complete list of states with Special category status.
