Mint Explainer: Special category status and what it means for the new government
Gadgil-Mukherjee formula, made up about 30% of total central assistance. They also benefit from a favourable funding ratio on centrally sponsored schemes, for which the union government covers 90% of the costs and the state only needs to cover 10%.
By contrast, states in the general category have to bear 20-40% of the costs. Special category states also receive additional incentives such as lower customs and excise duties and reduced income and corporate tax rates to attract more investment.
Bihar is seeking special category status due to persistent poverty and underdevelopment, exacerbated by the division of the state in 2000, which left it with limited natural resources. The state faces unreliable water supply for irrigation, frequent floods in the north, and severe droughts in the south.
Bihar’s per-capita GDP is around ₹54,000, among the lowest in India. Andhra Pradesh has been demanding special category status since 2014, owing to significant revenue loss after Hyderabad, a major economic hub, was transferred to Telangana.
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