Why Nitish Kumar Wants Special Category Status For Bihar — Everything You Need To Know About It

“Delhi tak chale gaye the vishesh rajya ke liye (he had gone till Delhi for the special category status),” said an enthusiastic supporter of Nitish Kumar during the election.

He was talking about a rally organised by Nitish Kumar in 2013 to pressure the Manmohan Singh government into accepting the demand for special category status (SCS) for Bihar.

Fast forward to 2024, and Nitish Kumar and his party Janata Dal (United) or JD(U) are back in Delhi. JD(U) is one of the planks on which the coalition government headed by Prime Minister Narendra Modi rests, given its dependence on alliance.

Quite naturally, one of the demands behind JD(U)’s support is the SCS for Bihar. Addressing the parliamentary party meeting of the National Democratic Alliance (NDA), Nitish Kumar had said, “All the pending works of Bihar will be done.” It is interpreted as a veiled reference to the demand for SCS.

Senior JD(U) leader and former Bihar finance minister Vijay Kumar Choudhary has officially confirmed that SCS is on the agenda.

Special category status is not a constitutional status. Instead, it is a statutory one brought upon by the 5th Finance Commission (a Constitutional body). The responsibility of granting it was bestowed upon the National Development Council of the erstwhile Planning Commission.

The criteria for granting SCS are hilly terrain, low population density and/or tribal location, strategic location between international borders, economic and infrastructural backwardness, and non-viable nature of state finances.

Based on the aforementioned criteria, Jammu and Kashmir, Nagaland, and Assam were granted SCS in 1969. Other states on the list are Himachal Pradesh, Manipur, Meghalaya, Sikkim, Tripura, Arunachal Pradesh, Mizoram, Uttarakhand and Telangana.

Telangana was the last state to acquire this status. It was given SCS because of its formation after getting carved out of Andhra Pradesh in 2014 — the predominant reason being the non-viable states finances.

Like Telangana, Bihar also does not strictly fulfil most of the criteria. For instance, most of the hilly terrain and tribal population are now part of Jharkhand, a state formed by the bifurcation of Bihar in 2000. Even its bordering country Nepal is not a threat. Only economic and infrastructural backwardness bolster Bihar’s need for SCS.

However, Bihar is one of the poorest states in India. According to the latest available figure, Bihar, with a gross state domestic product (GSDP) of Rs 9.76 lakh crore ($120 billion), is the 14th richest state in India — too low for a state with the third largest share in the population of the country. With the third-largest population and the 12th-largest land share, the state contributes barely 3.5 per cent to India’s economy.

The low productivity impacts people’s income and, by extension, human development indices in the state. Bihar’s per capita income is estimated at Rs 59,637, which means that an average Bihari struggles to earn Rs 5,000 a month — the lowest in India. The lion’s share of it is gobbled by the capital Patna, whose per capita income is between Rs 1.35 lakh and Rs 1.4 lakh.

On multiple human development indices, including those of the United Nations Development Programme and National Statistical Commission, Bihar is often found at the bottom of the list.

Talking about infrastructure, except for the national ranking of third in road density, there is not much to talk about in Bihar. The state has failed to channelise rapid roads and bridge construction towards attracting more investment.

There is absolutely no doubt that the state faces economic and infrastructural backwardness.

The real question is how did it get here? Are any of the factors mentioned by the 5th Finance Commission responsible for the condition in which Bihar is?

Though Bihar’s troubled journey with modernisation is a centuries-old story, the biggest roadblock in independent India was met by the Freight Equalisation Policy. This put landlocked and coastal states on the same platter.

Companies used to extract resources from Bihar, did finishing of products in coastal states, and saved export costs. Resources from Bihar helped other states get jobs and grow their GDP.

Soon, Bihar's human capital also became part of this resource drain.

The state went from one of the most industrialised ones in the 1950s to being affected by the worst form of tribal warfare in the 1990s. The problem was exacerbated by political turmoil — within a 20-year period from 1970-1990, the state was served by 14 chief ministers.

It was in 1990 when Lalu Yadav took charge that some kind of political stability peeped in. Underlying this peripheral political stability lay a social unrest unforeseen in Bihar’s history.

Targeted killings, dozens of dead bodies laid down as messages to the administration, political protection to goons, rapes of thousands of women including that of a bureaucrat’s wife, endless kidnappings, oligopoly of a few nefarious elements on contracts, and booth capturing at the time of elections are only a few of the categories of crime that had become a daily life affair for people.

Nitish Kumar’s tenure from 2005 to 2012 was a golden period for Bihar. Strongmen were sent to rot in jail, government projects were completed on time, schools were built, girls started to go to school, and the overall sentiment around law and order improved.

To put its impact in numbers — Bihar’s economy witnessed an average growth of 12 per cent per annum between the financial year (FY) 2006 and FY 2012.

Nitish Kumar bagged multiple national and international awards for his landmark initiatives in Bihar.

Taking advantage of this opportunity, he raised the demand for SCS. Initially, it was in a hushed tone, but as soon as the economy caught momentum, the ‘Vikash Purush (pet name of Nitish Kumar back then)’ galvanised the whole of the state.

Children, teachers, office goers and average daily wage workers were asked to be part of the rally demanding SCS. Beginning from the block level, the state-wide movement took more than five years to build.

In 2012, Nitish Kumar called Biharis for an Adhikar rally in the iconic Gandhi Maidan of Patna and told them that the Manmohan Singh government was discriminating against it.

Next year, 50,000 Biharis (mostly JD(U) activists and supporters) were in Ramlila Maidan to raise their voice. Nitish Kumar addressed them, intending as a signal of mass uprising against the Manmohan Singh government.

It is not that the demand went totally unheard. The Manmohan Singh government formed a committee under Raghuram Rajan to check its feasibility. The Rajan committee did place Bihar in the least developed category but recommended to totally do away with this concept. The alternative suggestion was an allocation of funds based on a multi-dimensional index.

And then politics happened. Two months after the aforementioned Delhi rally, Nitish Kumar ditched the NDA over differences about Narendra Modi being its candidate and joined hands with Lalu Yadav’s Rashtriya Janata Dal (RJD), which had been reduced to 22 seats in the 2010 assembly election (AE). The return of RJD derailed Bihar’s journey in such a way that the state has not been able to recover.

Crime rates went up while convictions went down, indicating a constant push by people in power to let criminals go scot-free.

Nitish Kumar realised the fatalities of his egoistic approach and did come back to the NDA, only to go back to RJD again. The to-and-fro approach with confused priorities made for unstable politics in Bihar, killing all development dreams.

Amongst all of this, Nitish Kumar shot himself in the foot by banning alcohol, creating a parallel black economy while simultaneously losing a key revenue source. The laws brought to enforce it are draconian to say the least.

For all these years, the demand for SCS dissipated into thin air. The unpopular Nitish Kumar government decided to do a caste census — a political operation masquerading as social justice.

It is when this caste census exposed the hollowness, inequality, and worst possible human development that Nitish Kumar suddenly remembered his old demand for SCS for Bihar.

In November 2023, when he was still in government with the RJD, Nitish Kumar passed a resolution in the Bihar Assembly for SCS. Except for late Sushil Kumar Modi’s clarification about the Rajan committee’s report, the BJP remained mute while Tejashwi Yadav, being in government, supported it. Yadav does not seem to hark back on it even though he is not a part of the government.

The crux is that Nitish Kumar’s fatal blunder of 2013 is responsible for this poor state of Bihar, necessitating a demand for SCS.

However, beyond populism, the practical reality is that the concept of SCS has ceased to exist based on the recommendation of the report of the 14th Finance Commission. The commission recommended increasing the share of devolution of the divisible pool funds for all states from 32 per cent to 42 per cent.

Even the planning commission, which played a decisive role in it, is now abandoned, with NITI Aayog now in charge.

Even if Bihar is given SCS, there is doubt over its overall impact on the state's economy.

The Centre funds 90 per cent of centrally-sponsored scheme costs for SCS states, with unspent funds carried forward. These states receive significant concessions in excise, customs duties, income tax and corporate tax. Additionally, 30 per cent of the Centre’s gross budget is allocated to them.

In his statement on Nitish Kumar passing the resolution, Sushil Kumar Modi, former finance and deputy chief minister of Bihar had said that the state has got more from Modi government than it would have availed if SCS was granted.

Official government data (between FY 2018 and FY 2023) on allocation of funds in devolution schemes of finance commission and GST also puts Bihar as one of the top beneficiaries.

Demand of SCS if fulfilled may open a can of worms for other states too. If any state wishes to get it, its administration also needs to be prepared for taking full responsibility of utilising it for the state's benefits.