Addressing Financial Imbalances in India: From ‘Special Category States’ to ‘Special Packages’

By : B. Muthu Kumar

Page No: 440-458

Abstract
With a view to address the needs of financially deprived states, conferment of ‘special category states’ status on such states was devised during the 1960s on the recommendations of the 5th Finance Commission of India. The ‘special category states’ status was conferred by the erstwhile National Development Council on the recommendations of the erstwhile Planning Commission on the basis of a criteria devised for the purpose. In view of the fact that the states conferred with this ‘status’ received substantially additional funds, more and more states started demanding its conferment, which, however, was technically not possible since it would have diluted the objective of this differential treatment. Accordingly, efforts were initiated to make the ‘special category states’ status less lucrative during early 2000s. Subsequently, a new mechanism of ‘Special packages’ has been evolved. The journey from ‘special category states’ to ‘Special packages’ in the context of Indian fiscal federalism has been explored in the article.

Author:
B. Muthu Kumar: Assistant Professor of Law, Government Law College, Ramanathapuram, Perungulam (P.O) Ramanathapuram.