Why Andhra Pradesh is Demanding Special Category Status

Special Category Status Demand

Special Category Status (SCS) was designed to assist states that face geographical, economical, or strategic disadvantages. Established by the Fifth Finance Commission in 1969, SCS provides specific financial and policy benefits to mitigate these challenges.
States under SCS receive a higher share of union tax revenue, significant central investment, and preferential treatment in central assistance and schemes.

Amidst the changing dynamics of central politics, N Chandrababu Naidu, leader of the Telugu Desam Party (TDP), has revitalized his long-standing campaign for SCS for Andhra Pradesh, leveraging his strengthened political position following the recent Lok Sabha elections.

TDP secured a crucial 16 Lok Sabha seats, significantly affecting the composition and power dynamics within the Indian Parliament. This result has positioned Naidu as a central figure in national politics, especially given the BJP’s need for allies to form a stable government.

Andhra Pradesh is demanding Special Category Status was a crucial part of the negotiations during the 2014 bifurcation of Andhra Pradesh, intended as a compensatory measure for the economic losses expected from losing Hyderabad to the newly formed state of Telangana.
Both Naidu and his successor, Y S Jagan Mohan Reddy, have vigorously pursued this status, highlighting it as critical to addressing the substantial fiscal deficits and developmental disparities faced by the residuary state of AP.

The state of Andhra Pradesh has faced substantial economic challenges post-bifurcation, including a significant revenue deficit and escalating state debt, which stood at more than Rs 3.5 lakh crore by recent counts.
SCS could dramatically alter AP’s economic trajectory by attracting investments, improving infrastructure, enhancing social services, and stimulating industrial growth, thus addressing these fiscal and developmental challenges.

Historically, the central government has been hesitant to extend SCS due to recommendations against it by the 14th Finance Commission and the associated financial burdens. However, the political leverage Naidu now holds may prompt a reevaluation of this stance.
Potential concessions might include specific financial assistance, infrastructural investments, or temporary measures akin to SCS to placate state demands without establishing a long-term precedent.

Naidu’s current political strength provides him a unique opportunity to negotiate terms that could include not just direct financial benefits but broader developmental assurances for Andhra Pradesh.
How the BJP navigates this negotiation could have significant implications for its alliances and political strategy, particularly in the context of southern Indian politics where regional parties play pivotal roles.

The outcome of these negotiations could influence future central-state relations and set precedents for how regional demands are managed within India’s federal structure.
Successfully balancing these demands with national fiscal policies could redefine the pathways available for regional parties to secure developmental goals for their states