Bihar

• 24 Mar 2025

Special Category Status for Bihar

Why in News? 

The Bihar chief minister reiterated the long-standing demand for granting Special Category Status (SCS) to the state before the 16th Finance Commission , which would increase the state's tax revenue from the Centre. 

Key Points 

• Special Category Status: 
  • Historical and structural challenges: Bihar faces significant economic challenges , including lack of industrial development and limited investment opportunities 
    • As a result of the division of the state, most of the industries shifted to Jharkhand , which increased the problems of employment and economic development in Bihar. 
  • Natural Calamities: The state is facing natural calamities like floods in the northern region and severe drought in the southern part . 
    • The recurrence of these disasters disrupts agricultural activities , especially in the case of irrigation facilities, and leads to inadequate water supply, affecting livelihoods and economic stability . 
  • Lack of Infrastructure: Bihar's inadequate infrastructure hinders the overall development of the state , with challenges such as poor road network, limited healthcare access, and lack of educational facilities . 
    • In 2013, the Raghuram Rajan Committee constituted by the Centre placed Bihar in the "least developed category". 
  • Poverty and Social Development: Bihar has a high poverty rate and a large number of families live below the poverty line. 
    • According to a survey by NITI Aayog, Bihar tops the list of poor states, with multidimensional poverty at 26.59% in 2022-23 , which is higher than the national average of 11.28%. 
    • Bihar's per capita Gross Domestic Product (GDP) for the year 2022-23 is only Rs 60,000 compared to the national average of Rs 1,69,496. 

Special Category Rating 

• Introduction: 
  • Special Category Status (SCS) is a classification granted by the Centre to aid the development of geographically and socio-economically backward states. 
  • The Constitution does not provide for SCS and this classification was done later in 1969 based on the recommendations of the Fifth Finance Commission . 
  • This status was first given to Jammu and Kashmir, Assam and Nagaland in 1969. Telangana is the latest state in India to receive this status. 
  • SCS is different from special status, which provides enhanced legislative and political rights, while SCS deals only with economic and financial aspects. 
    • For example, before the abrogation of Article 370, Jammu and Kashmir had special status. 
• Criteria for getting the rating ( based on Gadgil recommendations ): 
  • Mountainous terrain 
  • Low population density and/or large proportion of tribal population 
  • Strategic location on borders with neighbouring countries 
  • Backwardness in economic and infrastructure  
  • The unviable nature of state finances 
• Benefit: 
  • 90% of the funds required in a centrally sponsored scheme is paid to the special category states, compared to 60% or 75% in the case of other states , while the remaining funds are provided by the state governments. 
  • Unspent funds in a financial year do not lapse and are carried forward. 
  • These states are given significant concessions in excise and customs duties, income tax and corporate tax. 
  • 30% of the Centre's gross budget is provided to special category states.