Bihar, Andhra Pradesh demand for Special Category Status

1. The demand for 'special category status' for Andhra Pradesh and Bihar is anticipated to grow louder with the formation of a coalition government at the Centre.
2. The new government depends on regional parties for support. This reliance is likely to strengthen these states' demands for more financial aid and development benefits.

What is Special Category Status?

1. Special Category Status (SCS) is a classification granted by the Central Government to aid the development of states that face significant geographical and socio-economic challenges.
2. The Constitution does not have a specific provision for SCS. This classification was introduced based on the recommendations of the 5th Finance Commission in 1969.
3. The concept was the brainchild of Dhananjay Ramchandra Gadgil, the deputy chairman of the Planning Commission (now NITI Aayog), who formulated the Third Five-Year Plan.
4. Jammu and Kashmir, Assam, and Nagaland were the first states to receive Special Category Status in 1969.

What Are the Criteria Decided to Grant Special Status?

1. Hilly Terrain: States with difficult mountainous regions receive additional support to overcome development challenges.
2. Low Population Density/Tribal Population: States with sparse populations or significant tribal communities get extra resources to ensure balanced growth.
3. Border Location: States along international borders are provided enhanced aid for security and infrastructure needs.
4. Economic Backwardness: States that are economically underdeveloped and lack essential infrastructure receive financial assistance to boost development.

What is the current status of state with special status?

1. Over the time 11 States including Assam, Nagaland, Himachal Pradesh, Manipur, Jammu and Kashmir, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram and Uttarakhand have been accorded the special category state status.
2. Indeed, the 14^th Finance Commission recommended to abolish the 'special category status' for states, except for the North-eastern and three hill states.

What are benefits arising from Special Category Status?

1. Higher Central Funding: Special Category Status states receive 90% of the funds required for Centrally-Sponsored Schemes from the Centre, compared to 60% or 75% for other states. The remaining funds are provided by the state governments.
2. Unspent Funds: Any unspent money in a financial year does not lapse; instead, it is carried forward for future use.
3. Tax Concessions: States with Special Category Status enjoy significant concessions in excise duties, customs duties, income tax, and corporate tax.
4. Increased Budget Allocation: 30% of the Centre’s Gross Budget is allocated to Special Category states, providing them with substantial financial support.

Why is Bihar Demanding for Special Category Status?

1. Economic and Structural lagging: Bihar struggles with significant economic challenges, including limited industrial development and investment.
2. Bifurcation of state: The state's bifurcation led to industries moving to Jharkhand, worsening unemployment and economic growth issues.
3. Natural Disasters: Bihar frequently faces natural calamities, such as floods in the northern region and droughts in the southern part.
4. Infrastructure Deficits: The state's inadequate infrastructure hinders development, with poor road networks, limited healthcare, and challenges in education. In 2013, the Raghuram Rajan Committee categorized Bihar as "least developed."
5. Poverty and Social Development: Bihar has a high poverty rate, with 26.59% of its population classified as multidimensionally poor in 2022-23, according to a NITI Aayog survey.

Why is Andhra Pradesh Demanding Special Category Status?

1. Bifurcation of the State: Since its division in 2014, Andhra Pradesh has sought Special Category Status due to revenue losses from the transfer of Hyderabad to Telangana.
2. Increase Employment: Special Category Status is essential for rapid industrialization in the primarily agrarian state, which would create employment opportunities for youth and contribute to overall state development.
3. Encouraging Investments: Granting SCS would attract investments in sectors like speciality hospitals, five-star hotels, manufacturing industries, IT services, and premier institutions for higher education and research.
4. Infrastructure Development: Andhra Pradesh lacks a major capital city with established infrastructure after the bifurcation, as Hyderabad, the former capital, was retained by Telangana.
5. Backwardness in Key Sectors: The state has several backward districts, particularly in the Rayalaseema and north coastal regions.

Challenges of Granting Special Category Status (SCS)

1. Resource Allocation: Granting SCS requires the central government to provide additional financial assistance, which can strain its resources and budget allocations.
2. Dependency on Central Assistance: States with SCS often become overly dependent on central funding, potentially discouraging efforts toward self-sufficiency and independent economic growth.
3. Equity Concerns: Granting SCS to one state may lead to demands from other states, raising concerns about fairness and equity in resource distribution across the country.
4. Political Tensions: The allocation of SCS can become a politically contentious issue, leading to regional tensions and disputes between states that feel they are equally deserving.
5. Long-Term Financial Commitments: SCS involves long-term financial commitments from the central government, which may limit its flexibility to address other emerging national priorities.
6. Impact on Fiscal Discipline: States with SCS might engage in less disciplined fiscal practices, knowing they have guaranteed financial support from the Centre, which could lead to inefficiencies and financial mismanagement.

Way Forward

1. To ensure fairness and transparency in granting Special Category Status (SCS), the criteria need revisiting.
2. The 2013 Raghuram Rajan Committee suggested using a ‘multi-dimensional index’ for fund allocation, which could address socio-economic challenges more effectively. Policies should be implemented to reduce states' reliance on central aid by promoting self-sufficiency and economic diversification.
3. Additionally, analysts propose enhancing the rule of law for sustainable growth. States should create comprehensive development plans that include:
   1. Education Revamp: Improve early childhood development, teacher training, and integrate technology in pedagogy.
   2. Skilling and Job Creation: Focus on aligning skill development with industry needs and fostering entrepreneurship through initiatives like the SIPB.
   3. Infrastructure Development: Invest in irrigation systems and transport networks to connect rural and urban areas and support agricultural trade.
   4. Women's Empowerment and Social Inclusion: Address gender equality and social stratification through education, skill development, and financial inclusion initiatives.

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