Daily Hot Topic
Topic : Special Category Status (SCS)
GS-2 Mains : Polity
Revision Notes
The recent discussions around granting Special Category Status (SCS) to states like Bihar and Andhra Pradesh highlight an ongoing debate in India’s federal structure. Let’s delve into the concept of SCS, its benefits, and the arguments surrounding it.
What is Special Category Status?
Introduced in 1969 based on the recommendations of the fifth Finance Commission, SCS is a classification granted by the central government to states facing geographical and socio-economic disadvantages. It aims to provide additional support for overcoming challenges like:
- Hilly terrain and difficult geography
- Low population density or a significant tribal population
- Strategic location on international borders
- Economic and infrastructural backwardness
- Non-viable state finances
Benefits of SCS
Historically, SCS states received grants based on the Gadgil-Mukherjee formula, which allocated nearly 30% of central assistance for states to them. While this formula has been revised, SCS states still benefit from:
- Favorable Funding Ratio: Central funding for centrally sponsored schemes is divided 90:10 between the center and the state in SCS regions, compared to the 60:40 or 80:20 split for other states.
- Industrial Incentives: SCS states enjoy tax breaks like income tax exemptions, custom duty waivers, and reduced excise duties to attract businesses and boost industrial growth.
- Other Concessions: These states may benefit from exemptions related to GST and lower overall tax burdens.
The Demand for SCS
Several states, particularly Andhra Pradesh and Bihar, have been vocal in their demand for SCS.
- Andhra Pradesh’s Case: Following its bifurcation, Andhra Pradesh argues that SCS is crucial to overcome revenue loss and foster development in the absence of a major city like Hyderabad.
- Bihar’s Aspiration: Bihar seeks SCS to address widespread poverty and accelerate industrial growth within the state.
Controversy and Considerations
The concept of SCS has generated debate. Some argue that:
- Outdated Criteria: The criteria for granting SCS might not reflect the current economic landscape, potentially neglecting deserving states.
- Focus on Specific Regions: Overemphasis on SCS might divert resources from alternative development strategies that could benefit a wider range of states.
The Way Forward
As India strives to become a $5 trillion economy, a nuanced approach to development is essential. Here’s what we can learn from the SCS discussion:
- Need for Refinement: The criteria for granting SCS may need revision to ensure it addresses contemporary challenges and identifies truly disadvantaged regions.
- Complementary Strategies: Instead of solely relying on SCS, the central government and states can work together on targeted development initiatives to bridge regional disparities.
- Cooperative Federalism: Open dialogue guided by the spirit of cooperative federalism is crucial to ensure that all regions benefit from India’s economic progress.
In conclusion, the concept of Special Category Status highlights the ongoing need to address regional imbalances in India’s development journey. By learning from past experiences and fostering collaborative efforts, we can create a more inclusive and prosperous future for all.
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