Special category’ status is a classification given by Centre to states in order to assist in development of those states that face geographical & socio-economic disadvantages like hilly terrains, low population density and/or sizeable share of tribal population, strategic international borders, economic & infrastructural backwardness and non-viable state finances.
In India, distribution of finances from centre to state is undertaken by Finance commission and then planning communion.
Inception:
- There is no mention of Special category status in the constitution.
- SCS were first introduced in 1969, based on Gadgil formula and adopted for the distribution of plan assistance during 4th& 5th FYP
Thus SCS criterion was not provided by constitution, but by an executive order.
Why criterion was devised:
- In order to have a transparent and objective formula-based horizontal sharing of resources between the States
- Also states which were lacking behind in development due to hilly terrain, international borders, low finances etc and were deprived of robust infrastructure needed special assistance.
- In order to provide certain disadvantaged states with preferential treatment in the form of central assistance and tax breaks
- By providing preferential treatment in federal assistance and tax breaks, it would facilitate the growth and development of improvement social indicators, tax effort and fiscal mechanism. Thus, catalyzes the inflow of private investments and generates employment and additional revenue to state
- But as the situation has changed since the time of inception of SCS concept, 14th finance commission recommended that states would be better off with special economic package
Though SCS isn’t a panacea as suggested byDrRaghuramRajan committee, 2013 States needing special attention and funds could seek them in the form of special package.
