Amid rising demand and political clamour for ‘special status’ to Bihar and Andhra Pradesh, the Narendra Modi government on Tuesday generously opened its purse strings in the states ruled by allies JD(U) and TDP while deftly sidestepping the contentious issue over the nomenclature of the financial aid.
In her Union Budget speech 2024, Finance Minister Nirmala Sitharaman allocated special financial assistance to both states, effectively appeasing and pleasing two key allies – Bihar Chief Minister Nitish Kumar and Andhra Pradesh Chief Minister Chandrababu Naidu — without granting formal ‘special status’ to either. This strategic move ensures continued political support from these influential regional leaders while addressing the development needs of their states, said senior politicians of the BJP.
Effectively, Bihar will be getting Rs 37,500 crore in special funds allocated for multiple infrastructure projects across districts and flood mitigation plan, while there will be additional funds for the development of tourism and cultural circuit around Rajgir and Nalanda in the state.
The Centre will be releasing Rs 15,000 crore in the current financial year as special assistance for the industrial and infrastructural development of Amaravati, the new capital of Andhra Pradesh. Apart from this specific fund, the central government will also release additional financial assistance through multilateral development agencies.
Bypassing ‘Special Status’, Allocating ‘Special Funds’
Modi’s team of economists and the Finance Ministry have managed to navigate the complexities and complications of granting special status to states, an issue that has historically sparked significant debate and questioned the federal structure.
By bypassing these complications, limiting the controversies and instead providing special financial assistance, the Finance Minister has addressed regional development needs while maintaining political harmony, ensuring continued support and safeguarding the federal balance.
The Finance Ministry has worked around the Andhra Pradesh Reorganisation Act to allocate special funds to the state, while emphasizing on the NITI Aayog report about Bihar’s infrastructural needs.
Amravati in ‘Amrit Kaal’
Under the Andhra Pradesh Reorganisation Act, that was introduced in 2014, the Modi government has now recognised Amravati as the capital of Andhra Pradesh. The act formally bifurcated Andhra Pradesh into two states — Telangana and the residuary Andhra Pradesh — effective from June 2, 2014.
Hyderabad was then designated as the shared capital for both states for a period of up to 10 years. During this period, Andhra Pradesh would develop its own capital, which later became Amaravati. In 2024, the government finally and formally identified Amravati as the state capital.
A senior politician of the TDP told News18: “We will build Amravati in ‘Amrit Kaal’. We will make it one of the best state capitals in the country. We are grateful to the Modi government for supporting us in realising our dream.”
Big Boost for Bihar
For Bihar, the Centre has allocated Rs 37,500 crore, surpassing the funds announced for Andhra Pradesh. This includes special allocations for infrastructure projects, flood mitigation, and tourism-cultural circuit developments in Rajgir and Nalanda.
The multiple infrastructure projects for Bihar include the Buxar-Bhagalpur road, the Patna-Purnea Expressway, a two-lane bridge over the Ganga at Buxar, and improved road connectivity for Bodh Gaya, Rajgir, Darbhanga, and Vaishali. A special allocation of Rs 26,000 crore has been designated for these developments. Apart from this, the Centre has also announced Rs 11,500 crore as flood mitigation funds for Bihar.
Why No ‘Special Status’ to States?
Over the past decades, several states have been granted special status at various times, primarily due to their unique socio-economic and geographic challenges. The states include Jammu and Kashmir and the Northeastern states (Assam, Nagaland, Meghalaya, Manipur and Arunachal Pradesh) under Article 370 and Article 371, respectively.
Himachal Pradesh and Uttarakhand have also been granted special status for having difficult and diverse interior terrain. The government keeps reviewing such status over time. The special status of J&K now ceases to exist post abrogation of Article 370. Under special status, the states generally receive funding and tax incentives.
The special status for states has been a debated topic due to several reasons, and a senior economist said that with special status, some states receive preferential treatment in the form of financial assistance and tax incentives. This can create disparities among states, leading to debates about fairness and equality. It also carries huge political ramifications.
“Granting special status often involves political considerations, with parties using it as a tool to gain support in certain regions. This can lead to accusations of favoritism and political maneuvering. The government has diligently tried to move away from the politics of granting special status,” said a senior economist who has worked in PM Modi’s core team.
On Monday, Finance MoS Pankaj Chaudhury, while replying to a question on special status in Parliament, stated: “The Special Category Status for plan assistance was granted in the past by the National Development Council (NDC) to some states that were characterized by a number of features necessitating special consideration. These features included:
- Hilly and difficult terrain
- Low population density and/or sizable share of tribal population
- Strategic location along borders with neighboring countries
- Economic and infrastructural backwardness
- Non-viable nature of state finances
The decision was taken based on an integrated consideration of all the factors listed above and the peculiar situation of the state.
“Earlier, the request of Bihar for Special Category Status was considered by an Inter-Ministerial Group (IMG) which submitted its Report on March 30, 2012. The IMG came to the conclusion that based on existing NDC criteria, the case for Special Category Status for Bihar is not made out,” he added.
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