Bihar’s call for special category status (GS Paper 2, Polity)
Context
- Notably, the Bihar Cabinet had passed a resolution late last year demanding special category status to the State.
What is the special category status?
- The special category status was introduced in 1969 based on the recommendations of the Fifth Finance Commission.
- The intent was to help States that are disadvantaged in terms of their geographic, social or economic status to improve their position on par with other, more developed Indian States.
- Criteria such as having a hilly terrain and a sizable tribal population can entitle a State to be granted the special category status.
- A State that is granted the special category status 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.
Case of Bihar
- Bihar’s politicians have for a long time demanded special category status for the State pointing to its 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.
- Particularly, it has been noted that there is now 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.
- Hence, the demand for special category status from Bihar is simply seen as a ploy by State governments to demand even more funds from the Centre.
- The Centre may also fear that granting the special category status to certain States will encourage others to demand the same from the Centre.
- It should also be noted that political considerations play a large role in the granting of special status to States.
- States with better political bargaining power with the Centre may manage to receive more funds either through a special status or by other means.
Does Bihar need the special category status?
- Politicians at the State level generally have an incentive to compete for funds from the Centre as this would allow them to spend more.
- So it is not surprising that not just Bihar but many other States too, including Andhra Pradesh and Odisha which is prone to floods and has a significant tribal population, have demanded the special category status that would entitle them to more funds from the Centre’s treasury.
- Bihar’s economic backwardness has been cited as the primary reason for the need for the granting of the special category status to the State.
- Many analysts say this demand based on economic backwardness is very well justified as they believe that the State government will have to spend on welfare projects to uplift the poor and to invest in boosting the State’s infrastructure.
Conclusion
- In other words, while more funds from the Centre might offer Bihar some short-term relief, its long-term economic prospects will depend on the State’s ability to further strengthen rule of law.
