#185: Bihar and Special Category Status
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November 22, 2023
Bihar assembly passed a resolution. For?
Special Category Status!
Reason? 1/3rd of Bihar's population is living in poverty
(source: Bihar caste survey 2022)
But what is Special Category Status? How does it help?
The states that face a geographical & socioeconomic disadvantages are given a classification by Centre.
Recommended by 5th Finance Commission in 1969, it is based on 5 factors:
Hilly & difficult terrain
Non-viable nature of state finances
Economic & Infrastructural backwardness
Strategic location along international borders
Low population density -OR- sizeable tribal population
Which states have it till now?
Find all in this map!
What are the benefits that come with it?
a) Central Funding
As per Gadgil-Mukherjee formula, SCS states received 30% of total centra; assistance for states as grants.
This process saw a shift in post-Planning Commission era.
Now, as seen in 14th & 15th FC, assistance to SCS states is subsumed in increased devolution of divisible pool funds for all states.
This fund has increased to 41% from 32%
b) Centrally Sponsored Schemes (Centre:State ration)
General category states have 60:40 or 80:20 split depending on multiple factors
For SCS states, this proportion is 90:10
Other than these, SCS states also receive concessions in customs, excise, Income tax & Corporate rate etc. to attract investments and set up industries.
Case of Bihar
It is a consistent demand for decades owing to the poverty, backwardness and natural factors. Topped with lack of natural resources, floods, and shifting of minerals to Jharkhand, demand progressed
Lately, Bihar caste survey reaffirmed the poverty & backwardness
As per the passed resolution,
State has 94 lac poor families
SCS will bring about ₹2.5 lac crore to fund welfare measures
How justified is this demand?
Bihar completes all criteria set by 5th FC except hilly terrain
This does not negate the fact that it consistently stands as one of the poorest & backward states in the country. What shall be solution?
As per Raghuram Rajan Committee 2013,
Bihar is in the “least developed category”
A new methodology based on ‘Multi dimensional index’ shall be taken up to devolve funds in place of SCS
This, as per the committee, can be revisited to address the states’s backwardness
Which other states are demanding SCS?
Andhra Pradesh on losing revenue post-bifurcation
Odisha on grounds of vulnerability to natural calamities & large tribal population
How is the Centre reacting to these demands?
Based on recommendations of 14th FC, Centre has denied the demand repeatedly
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